Notes to the Reader 1. This document is extracted from Committee Print 108-B of the Committee on of the U.S. House of Representa- tives, and was prepared at the direction of that Committee. 2. Any material contained within brackets ø¿ is not part of the text of the law but is inserted as an aid to the reader. 3. Citations have been included to enable the reader to locate the same material in the United States Code (U.S.C.). These citations are not a part of the text of the law in which they appear. For changes after the revision date of this excerpt (September 30, 2004) to provisions of law in this publication that have citations to the U.S. Code, see the United States Code Classification Tables pub- lished by the Office of the Law Revision Counsel of the House of Representatives at http://uscode.house.gov/uscct.htm.

REVISED THROUGH SEPTEMBER 30, 2004 HOLDING ACT OF 1935 (References in brackets ø¿ are to title 15, United States Code)

AN ACT To provide for control and of public-utility holding , and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the ‘‘Public Utility Act of 1935.’’ TITLE I—CONTROL OF PUBLIC-UTILITY HOLDING COMPANIES

NECESSITY FOR CONTROL OF HOLDING COMPANIES

SECTION 1. ø79a¿ (a) Public-utility holding companies and their companies are affected with a national public in- terest in that, among other things, (1) their securities are widely marketed and distributed by means of the and instrumental- ities of interstate commerce and are sold to a large number of in- vestors in different States; (2) their , sales, construction, and other contracts and arrangements are often made and performed by means of the mails and instrumentalities of interstate com- merce; (3) their subsidiary public-utility companies often sell and transport gas and electric by the use of means and instru- mentalities of interstate commerce; (4) their practices in respect of and control over subsidiary companies often materially affect the interstate commerce in which those companies engage; (5) their ac- tivities extending over many States are not susceptible of effective control by any State and make difficult, if not impossible, effective State regulation of public-utility companies. (b) Upon the basis of facts disclosed by the reports of the Fed- eral Trade Commission made pursuant to S. Res. 83 (Seventieth Congress, first session), the reports of the Committee on Interstate and Foreign Commerce, House of Representatives, made pursuant to H. Res. 59 (Seventy-second Congress, first session) and H.J. Res. 572 (Seventy-second Congress, second session) and otherwise dis- closed and ascertained, it is hereby declared that the national pub- lic interest, the interest of in the securities of holding companies and their subsidiary companies and affiliates, and the interest of consumers of electric energy and natural and manufac- tured gas, are or may be adversely affected— (1) when such investors cannot obtain the information nec- essary to appraise the financial position or earning power of the issuers, because of the absence of uniform standard ac- counts; when such securities are issued without the approval or consent of the States having jurisdiction over subsidiary public-utility companies; when such securities are issued upon the basis of fictitious or unsound values having no fair 2 3P.U.H.C.A. of 1935 Sec. 2

relation to the sums invested in or the earning capacity of the properties and upon the basis of paper profits from intercom- pany transactions, or in anticipation of excessive from subsidiary public-utility companies; when such securities are issued by a subsidiary public-utility company under cir- cumstances which subject such company to the burden of sup- porting an overcapitalized structure and tend to prevent vol- untary rate reductions; (2) when subsidiary public-utility companies are subjected to excessive charges for services, construction , equipment, and materials, or enter into transactions in which evils result from an absence of arm’s-length bargaining or from restraint of free and independent ; when service, manage- ment, construction, and other contracts involve the allocation of charges among subsidiary public-utility companies in dif- ferent States so as to present problems of regulation which cannot be dealt with effectively by the States; (3) when control of subsidiary public-utility companies af- fects the practices and rate, , and other policies of such companies so as to complicate and obstruct State regulation of such companies, or when control of such companies is exerted through disproportionately small invest- ment; (4) when the growth and extension of holding companies bears no relation to economy of and operation or the integration and coordination of related operating prop- erties; or (5) when in any other respect there is lack of economy of management and operation of public-utility companies or lack of efficiency and adequacy of service rendered by such compa- nies, or lack of effective public regulation, or lack of economies in the raising of capital. (c) When abuses of the character above enumerated become persistent and wide-spread the holding company becomes an agen- cy which, unless regulated, is injurious to investors, consumers, and the general public; and it is hereby declared to be the policy of this title, in accordance with which policy all the provisions of this title shall be interpreted, to meet the problems and eliminate the evils as enumerated in this section, connected with public-util- ity holding companies which are engaged in interstate commerce or in activities which directly affect or burden interstate commerce; and for the purpose of effectuating such policy to compel the sim- plification of public-utility holding-company systems and the elimi- nation therefrom of properties detrimental to the proper func- tioning of such systems, and to provide as soon as practicable for the elimination of public-utility holding companies except as other- wise expressly provided in this title.

DEFINITIONS

SEC. 2. ø79b¿ (a) When used in this title, unless the context otherwise requires— (1) ‘‘Person’’ means an individual or company. (2) ‘‘Company’’ means a corporation, a partnership, an association, a joint- company, a trust, or an orga- Sec. 2 P.U.H.C.A. of 1935 4

nized group of persons, whether incorporated or not; or any re- ceiver, trustee, or other liquidating agent of any of the fore- going in his capacity as such. (3) ‘‘ company’’ means any company which owns or operates facilities used for the generation, trans- mission, or distribution of electric energy for sale, other than sale to tenants or employees of the company operating such facilities for their own use and not for resale. The Commission, upon application, shall by order declare a company operating any such facilities not to be an electric utility company if the Commission finds that (A) such company is primarily engaged in one or more other than the business of an elec- tric utility company, and by reason of the small amount of elec- tric energy sold by such company it is not necessary in the public interest or for the protection of investors or consumers that such company be considered an electric utility company for the purposes of this title, or (B) such company is one oper- ating within a single State, and substantially all of its out- standing securities are owned directly or indirectly by another company to which such operating company sells or furnishes electric energy which it generates; such other company uses and does not resell such electric energy, is engaged primarily in (other than the manufacturing of electric en- ergy or gas) and is not controlled by any other company; and by reason of the small amount of electric energy sold or fur- nished by such operating company to other persons it is not necessary in the public interest or for the protection of inves- tors or consumers that it be considered an electric utility com- pany for the purposes of this title. The filing of an application hereunder in good faith shall exempt such company (and the owner of the facilities operated by such company) from the ap- plication of this paragraph until the Commission has acted upon such application. As a condition to the entry of any such order, and as a part thereof, the Commission may require ap- plication to be made periodically for a renewal of such order, and may require the filing of such periodic or special reports regarding the business of the company as the Commission may find necessary or appropriate to insure that such company con- tinues to be entitled to such exemption during the period for which such order is effective. The Commission, upon its own motion or upon application, shall revoke such order whenever it finds that the conditions specified in clause (A) or (B) are not satisfied in the case of such company. Any action of the Com- mission under the preceding sentence shall be by order. Appli- cation under this paragraph may be made by the company in respect of which the order is to be issued or by the owner of the facilities operated by such company. Any order issued under this paragraph shall apply equally to such company and such owner. The Commission may by rules or con- ditionally or unconditionally provide that any specified class or classes of companies which it determines to satisfy the condi- tions specified in clause (A) or (B), and the owners of the facili- ties operated by such companies, shall not be deemed electric utility companies within the meaning of this paragraph. 5P.U.H.C.A. of 1935 Sec. 2

(4) ‘‘Gas utility company’’ means any company which owns or operates facilities used for the distribution at (other than distribution only in enclosed portable containers, or dis- tribution to tenants or employees of the company operating such facilities for their own use and not for resale) of natural or manufactured gas for heat, light, or power. The Commission, upon application, shall by order declare a company operating any such facilities not to be a gas utility company if the Com- mission finds that (A) such company is primarily engaged in one or more businesses other than the business of a gas utility company, and (B) by reason of the small amount of natural or manufactured gas distributed at retail by such company it is not necessary in the public interest or for the protection of investors or consumers that such company be considered a gas utility company for the purposes of this title. The filing of an application hereunder in good faith shall exempt such company (and the owner of the facilities operated by such company) from the application of this paragraph until the Commission has acted upon such application. As a condition to the entry of any such order, and as a part thereof, the Commission may re- quire application to be made periodically for a renewal of such order, and may require the filing of such periodic or special re- regarding the business of the company as the Commis- sion may find necessary or appropriate to insure that such company continues to be entitled to such exemption during the period for which such order is effective. The Commission, upon its own motion or upon application, shall revoke such order whenever it finds that the conditions specified in clauses (A) and (B) are not satisfied in the case of such company. Any ac- tion of the Commission under the preceding sentence shall be by order. Application under this paragraph may be made by the company in respect of which the order is to be issued or by the owner of the facilities operated by such company. Any order issued under this paragraph shall apply equally to such company and such owner. The Commission may by rules or regulations conditionally or unconditionally provide that any specified class or classes of companies which it determines to satisfy the conditions specified in clauses (A) and (B), and the owners of the facilities operated by such companies, shall not be deemed gas utility companies within the meaning of this paragraph. (5) ‘‘Public-utility company’’ means an electric utility com- pany or a gas utility company. (6) ‘‘Commission’’ means the Securities and Exchange Commission. (7) ‘‘Holding company’’ means— (A) any company which directly or indirectly owns, controls, or holds with power to vote, 10 per centum or more of the outstanding voting securities of a public-utility company or of a company which is a holding company by virtue of this clause or clause (B), unless the Commission, as hereinafter provided, by order declares such company not to be a holding company; and Sec. 2 P.U.H.C.A. of 1935 6

(B) any person which the Commission determines, after notice and opportunity for hearing, directly or indi- rectly to exercise (either alone or pursuant to an arrange- ment or understanding with one or more other persons) such a controlling influence over the management or poli- cies of any public-utility or holding company as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that such person be subject to the obligations, duties, and liabilities imposed in this title upon holding companies. The Commission, upon application, shall by order declare that a company is not a holding company under clause (A) if the Commission finds that the applicant (i) does not, either alone or pursuant to an arrangement or understanding with one or more other persons, directly or indirectly control a public-util- ity or holding company either through one or more inter- mediary persons or by any means or device whatsoever, (ii) is not an intermediary company through which such control is exercised, and (iii) does not, directly or indirectly, exercise (either alone or pursuant to an arrangement or understanding with one or more other persons) such a controlling influence over the management or policies of any public-utility or hold- ing company as to make it necessary or appropriate in the pub- lic interest or for the protection of investors or consumers that the applicant be subject to the obligations, duties, and liabil- ities imposed in this title upon holding companies. The filing of an application hereunder in good faith by a company other than a registered holding company shall exempt the applicant from any obligation, duty, or liability imposed in this title upon the applicant as a holding company, until the Commission has acted upon such application. Within a reasonable time after the receipt of any application hereunder, the Commission shall enter an order granting, or, after notice and opportunity for hearing, denying or otherwise disposing of, such application. As a condition to the entry of any order granting such applica- tion and as a part of any such order, the Commission may re- quire the applicant to apply periodically for a renewal of such order and to do or refrain from doing such acts or things, in respect of exercise of voting rights, control over proxies, des- ignation of officers and directors, existence of interlocking offi- cers, directors and other relationships, and submission of peri- odic or special reports regarding affiliations or intercorporate relationships of the applicant, as the Commission may find necessary or appropriate to ensure that in the case of the ap- plicant the conditions specified in clauses (i), (ii), and (iii) are satisfied during the period for which such order is effective. The Commission, upon its own motion or upon application of the company affected, shall revoke the order declaring such company not to be a holding company whenever in its judg- ment any condition specified in clause (i), (ii), or (iii) is not sat- isfied in the case of such company, or modify the terms of such order whenever in its judgment such modification is necessary to ensure that in the case of such company the conditions specified in clauses (i), (ii), and (iii) are satisfied during the pe- 7P.U.H.C.A. of 1935 Sec. 2

riod for which such order is effective. Any action of the Com- mission under the preceding sentence shall be by order. (8) ‘‘Subsidiary company’’ of a specified holding company means— (A) any company 10 per centum or more of the out- standing voting securities of which are directly or indi- rectly owned, controlled, or held with power to vote, by such holding company (or by a company that is a sub- sidiary company of such holding company by virtue of this clause or clause (B)), unless the Commission, as herein- after provided, by order declares such company not to be a subsidiary company of such holding company; and (B) any person the management or policies of which the Commission, after notice and opportunity for hearing, determines to be subject to a controlling influence, directly or indirectly, by such holding company (either alone or pursuant to an arrangement or understanding with one or more other persons) so as to make it necessary or appro- priate in the public interest or for the protection of inves- tors or consumers that such person be subject to the obli- gations, duties, and liabilities imposed in this title upon subsidiary companies of holding companies. The Commission, upon application, shall by order declare that a company is not a subsidiary company of a specified holding company under clause (A) if the Commission finds that (i) the applicant is not controlled, directly or indirectly, by such hold- ing company (either alone or pursuant to an arrangement or understanding with one or more other persons) either through one or more intermediary persons or by any means or device whatsoever, (ii) the applicant is not an intermediary company through which such control of another company is exercised, and (iii) the management or policies of the applicant are not subject to a controlling influence, directly or indirectly, by such holding company (either alone or pursuant to an arrangement or understanding with one or more other persons) so as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that the applicant be subject to the obligations, duties, and liabilities imposed in this title upon subsidiary companies of holding companies. The fil- ing of an application hereunder in good faith shall exempt the applicant from any obligation, duty, or liability imposed in this title upon the applicant as a subsidiary company of such speci- fied holding company until the Commission has acted upon such application. Within a reasonable time after the receipt of any application hereunder, the Commission shall enter an order granting, or, after notice and opportunity for hearing, de- nying or otherwise disposing of, such application. As a condi- tion to the entry of, and as a part of, any order granting such application, the Commission may require the applicant to apply periodically for a renewal of such order and to file such periodic or special reports regarding the affiliations or intercor- porate relationships of the applicant as the Commission may find necessary or appropriate to enable it to determine whether in the case of the applicant the conditions specified in clauses Sec. 2 P.U.H.C.A. of 1935 8

(i), (ii), and (iii) are satisfied during the period for which such order is effective. The Commission, upon its own motion or upon application, shall revoke the order declaring such com- pany not to be a subsidiary company whenever in its judgment any condition specified in clause (i), (ii), or (iii) is not satisfied in the case of such company, or modify the terms of such order whenever in its judgment such modification is necessary to en- sure that in the case of such company the conditions specified in clauses (i), (ii), and (iii) are satisfied during the period for which such order is effective. Any action of the Commission under the preceding sentence shall be by order. Any applica- tion under this paragraph may be made by the holding com- pany or the company in respect of which the order is to be en- tered, but as used in this paragraph the term ‘‘applicant’’ means only the company in respect of which the order is to be entered. (9) ‘‘Holding-company system’’ means any holding com- pany, together with all its subsidiary companies, and all mu- tual service companies (as defined in paragraph (13) of this subsection) of which such holding company or any subsidiary company thereof is a member company (as defined in para- graph (14) of this subsection). (10) ‘‘Associate company’’ of a company means any com- pany in the same holding-company system with such company. (11) ‘‘Affiliate’’ of a specified company means— (A) any person that directly or indirectly owns, con- trols, or holds with power to vote, 5 per centum or more of the outstanding voting securities of such specified com- pany; (B) any company 5 per centum or more of whose out- standing voting securities are owned, controlled, or held with power to vote, directly or indirectly, by such specified company; (C) any individual who is an officer or director of such specified company, or of any company which is an affiliate thereof under clause (A) of this paragraph; and (D) any person or class of persons that the Commis- sion determines, after appropriate notice and opportunity for hearing, to stand in such relation to such specified com- pany that there is liable to be such an absence of arm’s- length bargaining in transactions between them as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that such per- son be subject to the obligations, duties, and liabilities im- posed in this title upon affiliates of a company. (12) ‘‘Registered holding company’’ means a person whose registration is in effect under section 5. (13) ‘‘Mutual service company’’ means a company approved as a mutual service company under section 13. (14) ‘‘Member company’’ means a company which is a member of an association or group of companies mutually served by a mutual service company. 9P.U.H.C.A. of 1935 Sec. 2

(15) ‘‘Director’’ means any director of a corporation or any individual who performs similar functions in respect of any company. (16) ‘‘’’ means any note, draft, stock, treasury stock, , debenture, certificate of interest or participation in any -sharing agreement or in any oil, gas, other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, con- tract, voting-trust certificate, certificate of deposit for a secu- rity, receiver’s or trustee’s certificate, or, in general, any in- strument commonly known as a ‘‘security’’; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guaranty of, assumption of liability on, or or right to subscribe to or purchase, any of the foregoing. (17) ‘‘Voting security’’ means any security presently enti- tling the owner or holder thereof to vote in the direction or management of the affairs of a company, or any security issued under or pursuant to any trust, agreement, or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a company; and a specified per centum of the outstanding voting securities of a company means such amount of the outstanding voting securi- ties of such company as entitles the holder or holders thereof to cast said specified per centum of the aggregate votes which the holders of all the outstanding voting securities of such com- pany are entitled to cast in the direction or management of the affairs of such company. (18) ‘‘Utility ’’ means the facilities, in place, of any electric utility company or gas utility company for the produc- tion, transmission, transportation, or distribution of electric en- ergy or natural or manufactured gas. (19) ‘‘Service contract’’ means any contract, agreement, or understanding whereby a person undertakes to sell or furnish, for a charge, any managerial, financial, legal, , pur- chasing, marketing, auditing, statistical, advertising, publicity, , research, or any other service, information, or data. (20) ‘‘Sales contract’’ means any contract, agreement, or understanding whereby a person undertakes to sell, lease, or furnish, for a charge, any goods, equipment, materials, sup- plies, appliances, or similar property. As used in this para- graph the term ‘‘property’’ does not include electric energy or natural or manufactured gas. (21) ‘‘Construction contract’’ means any contract, agree- ment, or understanding for the construction, extension, improvement, maintenance, or repair of the facilities or any part thereof of a company for a charge. (22) ‘‘Buy’’, ‘‘acquire’’, ‘‘acquisition’’, or ‘‘purchase’’ includes any purchase, acquisition by lease, exchange, merger, consoli- dation, or other acquisition. (23) ‘‘Sale’’ or ‘‘sell’’ includes any sale, disposition by lease, exchange or pledge, or other disposition. (24) ‘‘State’’ means any State of the United States or the of Columbia. Sec. 2 P.U.H.C.A. of 1935 10

(25) ‘‘United States’’, when used in a geographical sense, means the States. (26) ‘‘State commission’’ means any commission, board, agency, or officer, by whatever name designated, of a State, , or other political subdivision of a State which under the law of such State has jurisdiction to regulate public- utility companies. (27) ‘‘State securities commission’’ means any commission, board, agency, or officer, by whatever name designated, other than a State commission as defined in paragraph (26) of this subsection, which under the law of a State has jurisdiction to regulate, approve, or control the issue or sale of a security by a company. (28) ‘‘Interstate commerce’’ means trade, commerce, trans- portation, transmission, or communication among the several States or between any State and any place outside thereof. (29) ‘‘Integrated public-utility system’’ means— (A) As applied to electric utility companies, a system consisting of one or more units of generating plants and/ or transmission lines and/or distributing facilities, whose utility assets, whether owned by one or more electric util- ity companies, are physically interconnected or capable of physical interconnection and which under normal condi- tions may be economically operated as a single inter- connected and coordinated system confined in its oper- ations to a single area or region, in one or more States, not so large as to impair (considering the state of the art and the area or region affected) the advantages of localized management, efficient operation, and the effectiveness of regulation; and (B) As applied to gas utility companies, a system con- sisting of one or more gas utility companies which are so located and related that substantial economies may be effectuated by being operated as a single coordinated sys- tem confined in its operations to a single area or region, in one or more States, not so large as to impair (consid- ering the state of the art and the area or region affected) the advantages of localized management, efficient oper- ation, and the effectiveness of regulation; Provided, That gas utility companies deriving from a common source of supply may be deemed to be included in a single area or region. (b) No person shall be deemed to be a holding company under clause (B) of paragraph (7) of subsection (a), or a subsidiary com- pany under clause (B) of paragraph (8) of such subsection, or an affiliate under clause (D) of paragraph (11) of such subsection, un- less the Commission, after appropriate notice and opportunity for hearing, has issued an order declaring such person to be a holding company, a subsidiary company, or an affiliate, or declaring a class of which such person is a member to be affiliates. Such an order shall not become effective for at least thirty days after the mailing of a copy thereof to the person thereby declared to be a holding company, subsidiary company, or affiliate; or, in the case of deter- mination of affiliates by classes, until at least thirty days after 11P.U.H.C.A. of 1935 Sec. 3 appropriate publication thereof in such manner as the Commission shall determine. Whenever the Commission, on its own motion or upon application by the person declared to be a holding company, subsidiary company, or affiliate, finds that the circumstances which gave rise to the issuance of any such order no longer exist, the Commission shall by order revoke such order. (c) No provision in this title shall apply to, or be deemed to in- clude, the United States, a State, or any political subdivision of a State, or any agency, authority, or instrumentality of any one or more of the foregoing, or any corporation which is wholly owned di- rectly or indirectly by any one or more of the foregoing, or any offi- cer, agent, or employee of any of the foregoing acting as such in the course of his official duty, unless such provision makes specific ref- erence thereto.

POWER TO MAKE PARTICULAR EXEMPTIONS REGARDING HOLDING COMPANIES, SUBSIDIARY COMPANIES, AND AFFILIATES SEC. 3. ø79c¿ (a) 1 The Commission, by rules and regulations upon its own motion, or by order upon application, shall exempt any holding company, and every subsidiary company thereof as such, from any provision or provisions of this title, unless and ex- cept insofar as it finds the exemption detrimental to the public in- terest or the interest of investors or consumers, if— (1) such holding company, and every subsidiary company thereof which is a public-utility company from which such holding company derives, directly or indirectly, any material part of its income, are predominantly intrastate in character and carry on their business substantially in a single State in which such holding company and every such subsidiary com- pany thereof are organized; (2) such holding company is predominantly a public-utility company whose operations as such do not extend beyond the State in which it is organized and States contiguous thereto; (3) such holding company is only incidentally a holding company, being primarily engaged or interested in one or more businesses other than the business of a public-utility company and (A) not deriving, directly or indirectly, any material part of its income from any one or more subsidiary companies, the principal business of which is that of a public-utility company, or (B) deriving a material part of its income from any one or more such subsidiary companies, if substantially all the out- standing securities of such companies are owned, directly or in- directly, by such holding company;

1 Public Law 99–648 (100 Stat. 3632), entitled ‘‘An Act to clarify the exemptive authority of the Securities and Exchange Commission,’’ provides as follows: ‘‘Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That notwithstanding section 3(a) of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79c(a)), a holding company which has only one subsidiary company that is solely a gas utility company, as defined in said Act, shall be exempt from all provisions, ex- cept section 9(a)(2), of said Act if neither the holding company nor any other subsidiary company is a public utility company, the operations of such subsidiary gas utility company do not exceed beyond the State in which it is organized, the subsidiary company was incorporated on June 16, 1986, for the express purpose of operating as a gas utility company, and all of whose voting securities are owned by the holding company, and neither the holding company, nor any of its subsidiary companies are engaged in residential or commercial plumbing, heating, refrigeration, air-conditioning, or in the sale, installation or servicing of such or related equipment.’’ Sec. 3 P.U.H.C.A. of 1935 12

(4) such holding company is temporarily a holding com- pany solely by reason of the acquisition of securities for pur- poses of liquidation or distribution in connection with a bona fide debt previously contracted or in connection with a bona fide arrangement for the or distribution of securi- ties; or (5) such holding company is not, and derives no material part of its income, directly or indirectly, from any one or more subsidiary companies which are, a company or companies the principal business of which within the United States is that of a public-utility company. (b) The Commission, by rules and regulations upon its own mo- tion, or by order upon application, shall exempt any subsidiary company, as such, of a holding company from any provision or pro- visions of this title, the application of which to such subsidiary company the Commission finds is not necessary in the public inter- est or for the protection of investors, if such subsidiary company derives no material part of its income, directly or indirectly, from sources within the United States, and neither it nor any of its sub- sidiary companies is a public-utility company operating in the United States. (c) Within a reasonable time after the receipt of an application for exemption under subsection (a) or (b), the Commission shall enter an order granting, or, after notice and opportunity for hear- ing, denying or otherwise disposing of such application. The filing of an application in good faith under subsection (a) by a person other than a registered holding company shall exempt the appli- cant from any obligation, duty, or liability imposed in this title upon the applicant as a holding company until the Commission has acted upon such application. The filing of an application in good faith under subsection (b) shall exempt the applicant from any obli- gation, duty, or liability imposed in this title upon the applicant as a subsidiary company until the Commission has acted upon such application. Whenever the Commission, on its own motion, or upon application by the holding company or any subsidiary company thereof exempted by any order issued under subsection (a), or by the subsidiary company exempted by any order issued under sub- section (b), finds that the circumstances which gave rise to the issuance of such order no longer exist, the Commission shall by order revoke such order. (d) The Commission may, by rules and regulations, condi- tionally or unconditionally exempt any specified class or classes of persons from the obligations, duties, or liabilities imposed upon such persons as subsidiary companies or affiliates under any provi- sion or provisions of this title, and may provide within the extent of any such exemption that such specified class or classes of per- sons shall not be deemed subsidiary companies or affiliates within the meaning of any such provision or provisions, if and to the ex- tent that it deems the exemption necessary or appropriate in the public interest or for the protection of investors or consumers and not contrary to the purposes of this title. 13P.U.H.C.A. of 1935 Sec. 5

TRANSACTIONS BY UNREGISTERED HOLDING COMPANIES

SEC. 4. ø79d¿ (a) After December 1, 1935, unless a holding company is registered under section 5, it shall be unlawful for such holding company, directly or indirectly— (1) to sell, transport, transmit, or distribute, or own or op- erate any utility assets for the transportation, transmission, or distribution of, natural or manufactured gas or electric energy in interstate commerce; (2) by use of the mails or any means or instrumentality of interstate commerce, to negotiate, enter into, or take any step in the performance of, any service, sales, or construction con- tract undertaking to perform services or construction work for, or sell goods to, any public-utility company or holding com- pany; (3) to distribute or make any for sale or ex- change of any security of such holding company, any sub- sidiary company or affiliate of such holding company, any pub- lic-utility company, or any holding company, by use of the mails or any means or instrumentality of interstate commerce, or to sell any such security having reason to believe that such security, by use of the mails or any means or instrumentality of interstate commerce, will be distributed or made the subject of a public offering; (4) by use of the mails or any means or instrumentality of interstate commerce, to acquire or negotiate for the acquisition of any security or utility assets of any subsidiary company or affiliate of such holding company, any public-utility company, or any holding company; (5) to engage in any business in interstate commerce; or (6) to own, control, or hold with power to vote, any security of any subsidiary company thereof that does any of the acts enumerated in paragraphs (1) to (5), inclusive, of this sub- section. (b) Every holding company which has outstanding any security any of which, by use of the mails or any means or instrumentality of interstate commerce, has been distributed or made the subject of a public offering subsequent to January 1, 1925, and any of which security is owned or held on October 1, 1935 (or, if such com- pany is not a holding company on that date, on the date such com- pany becomes a holding company) by persons not resident in the State in which such holding company is organized, shall register under section 5 on or before December 1, 1935 or the thirtieth day after such company becomes a holding company, whichever date is later.

REGISTRATION OF HOLDING COMPANIES

SEC. 5. ø79e¿ (a) On or at any time after October 1, 1935, any holding company or any person purposing to become a holding com- pany may register by filing with the Commission a notification of registration, in such form as the Commission may by rules and reg- ulations prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers. A person shall be Sec. 5 P.U.H.C.A. of 1935 14 deemed to be registered upon receipt by the Commission of such notification of registration. (b) It shall be the duty of every registered holding company to file with the Commission, within such reasonable time after reg- istration as the Commission shall fix by rules and regulations or order, a registration statement in such form as the Commission shall by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers. Such registration statement shall include— (1) such copies of the charter or articles of incorporation, partnership, or agreement, with all amendments thereto, and the bylaws, trust indentures, mortgages, underwriting arrange- ments, voting-trust agreements, and similar documents, by whatever name known, of or relating to the registrant or any of its associate companies as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors or con- sumers; (2) such information in such form and in such detail relat- ing to, and copies of such documents of or relating to, the reg- istrant and its associate companies as the Commission may by rules and regulations or order prescribe as necessary or appro- priate in the public interest or for the protection of investors or consumers in respect of— (A) the organization and financial structure of such companies and the nature of their business; (B) the terms, position, rights, and privileges of the different classes of their securities outstanding; (C) the terms and underwriting arrangements under which their securities, during not more than the five pre- ceding years, have been offered to the public or otherwise disposed of and the relations of underwriters to, and their interest in, such companies; (D) the directors and officers of such companies, their remuneration, their interest in the securities of, their material contracts with, and their borrowings from, any of such companies; (E) bonus and profit-sharing arrangements; (F) material contracts, not made in the ordinary course of business, and service, sales, and construction contracts; (G) options in respect of securities; (H) balance sheets for not more than the five pre- ceding fiscal years certified, if required by the rules and regulations of the Commission, by an independent public ; 1 (I) profit and loss statements for not more than the five preceding fiscal years, certified, if required by the rules and regulations of the Commission, by an inde- pendent public accountant; (3) such further information or documents regarding the registrant or its associate companies or the relations between

1 So in law. Probably should include ‘‘and’’ after the semicolon at the end. 15P.U.H.C.A. of 1935 Sec. 6

them as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers. (c) The Commission by such rules and regulations or order as it deems necessary or appropriate in the public interest or for the protection of investors or consumers, may permit a registrant to file a preliminary registration statement without complying with the provisions of subsection (b); but every registrant shall file a complete registration statement with the Commission within such reasonable period of time as the Commission shall fix by rules and regulations or order, but not later than one year after the date of registration. (d) Whenever the Commission, upon application, finds that a registered holding company has ceased to be a holding company, it shall so declare by order and upon the taking effect of such order the registration of such company shall, upon such terms and condi- tions as the Commission finds and in such order prescribes as nec- essary for the protection of investors, cease to be in effect. The de- nial of any such application by the Commission shall be by order.

UNLAWFUL SECURITY TRANSACTIONS BY REGISTERED HOLDING AND SUBSIDIARY COMPANIES

SEC. 6. ø79f¿ (a) Except in accordance with a declaration effec- tive under section 7 and with the order under such section permit- ting such declaration to become effective, it shall be unlawful for any registered holding company or subsidiary company thereof, by use of the mails or any means or instrumentality of interstate com- merce, or otherwise, directly or indirectly (1) to issue or sell any security of such company; or (2) to exercise any privilege or right to alter the priorities, preferences, voting power, or other rights of the holders of an outstanding security of such company. (b) The provisions of subsection (a) shall not apply to the issue, renewal, or guaranty by a registered holding company or subsidiary company thereof of a note or draft (including the pledge of any security as collateral therefor) if such note or draft (1) is not part of a public offering, (2) matures or is renewed for not more than nine months, exclusive of days of grace, after the date of such issue, renewal, or guaranty thereof, and (3) aggregates (together with all other then outstanding notes and drafts of a maturity of nine months or less, exclusive of days of grace, as to which such company is primarily or secondarily liable) not more than 5 per centum of the principal amount and par value of the other securi- ties of such company then outstanding, or such greater per centum thereof as the Commission upon application may by order author- ize as necessary or appropriate in the public interest or for the pro- tection of investors or consumers. In the case of securities having no principal amount or no par value, the value for the purposes of this subsection shall be the fairmarket value as of the date of issue. The Commission by rules and regulations or order, subject to such terms and conditions as it deems appropriate in the public interest or for the protection of investors or consumers, shall exempt from the provisions of subsection (a) the issue or sale of any security by any subsidiary company of a registered holding company, if the issue and sale of such security are solely for the purpose of financ- Sec. 7 P.U.H.C.A. of 1935 16 ing the business of such subsidiary company and have been ex- pressly authorized by the State commission of the State in which such subsidiary company is organized and doing business, or if the issue and sale of such security are solely for the purpose of financ- ing the business of such subsidiary company when such subsidiary company is not a holding company, a public-utility company, an investment company, or a fiscal or financing agency of a holding company, a public-utility company, or an investment company. The provisions of subsection (a) shall not apply to the issue, by a reg- istered holding company or subsidiary company thereof, of a secu- rity issued pursuant to the terms of any security outstanding on January 1, 1935, giving the holder of such outstanding security the right to convert such outstanding security into another security of the same issuer or of another person, or giving the right to sub- scribe to another security of the same issuer or another issuer. Within ten days after any issue, sale, renewal, or guaranty exempted from the application of subsection (a) by or under author- ity of this subsection, such holding company or subsidiary company thereof shall file with the Commission a certificate of notification in such form and setting forth such of the information required in a declaration under section 7 as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers. (c) It shall be unlawful, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, for any reg- istered holding company or any subsidiary company thereof, di- rectly or indirectly,— (1) to sell or offer for sale or to cause to be sold or offered for sale, from house to house, any security of such holding com- pany; or (2) to cause any officer or employee of any subsidiary com- pany of such holding company to sell or cause to be sold any security of such holding company. As used in this subsection the term ‘‘house’’ shall not include an office used for business purposes.

DECLARATIONS BY REGISTERED HOLDING AND SUBSIDIARY COMPANIES IN RESPECT OF SECURITY TRANSACTIONS

SEC. 7. ø79g¿ (a) A registered holding company or subsidiary company thereof may file a declaration with the Commission, re- garding any of the acts enumerated in subsection (a) of section 6, in such form as the Commission may be rules and regulations pre- scribe as necessary or appropriate in the public interest or for the protection of investors or consumers. Such declaration shall include— (1) such of the information and documents which are re- quired to be filed in order to register a security under section 7 of the Securities Act of 1933, as amended, as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers; and (2) such additional information, in such form and detail, and such documents regarding the declarant or any associate company thereof, the particular security and compliance with 17P.U.H.C.A. of 1935 Sec. 7

such State laws as may apply to the act in question as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the pro- tection of investors or consumers. (b) A declaration filed under this section shall become effective within such reasonable period of time after the filing thereof as the Commission shall fix by rules and regulations or order, unless the Commission prior to the expiration of such period shall have issued an order to the declarant to show cause why such declaration should become effective. Within a reasonable time after an oppor- tunity for hearing upon an order to show cause under this sub- section, unless the declarant shall withdraw its declaration, the Commission shall enter an order either permitting such declaration to become effective as filed or amended, or refusing to permit such declaration to become effective. Amendments to a declaration may be made upon such terms and conditions as the Commission may prescribe. (c) The Commission shall not permit a declaration regarding the issue or sale of a security to become effective unless it finds that— (1) such security is (A) a common stock having a par value and being without preference as to or distribution over, and having at least equal voting rights with, any out- standing security of the declarant; (B) a bond (i) secured by a first lien on physical property of the declarant, or (ii) secured by an obligation of a subsidiary company of the declarant se- cured by a first lien on physical property of such subsidiary company, or (iii) secured by any other assets of the type and character which the Commission by rules and regulations or order may prescribe as appropriate in the public interest or for the protection of investors; (C) a guaranty of, or assumption of liability on, a security of another company; or (D) a receiver’s or trustee’s certificate duly authorized by the appropriate court or courts; or (2) such security is to be issued or sold solely (A) for the purpose of refunding, extending, exchanging, or discharging an outstanding security of the declarant and/or a predecessor com- pany thereof or for the purpose of effecting a merger, consolida- tion, or other reorganization; (B) for the purpose of financing the business of the declarant as a public-utility company; (C) for the purpose of financing the business of the declarant, when the declarant is neither a holding company nor a public- utility company; and/or (D) for necessary and urgent corporate purposes of the declarant where the requirements of the provi- sions of paragraph (1) would impose an unreasonable financial burden upon the declarant and are not necessary or appro- priate in the public interest or for the protection of investors or consumers; or (3) such security is one the issuance of which was author- ized by the company prior to January 1, 1935, and which the Commission by rules and regulations or order authorizes as necessary or appropriate in the public interest or for the pro- tection of investors or consumers. Sec. 8 P.U.H.C.A. of 1935 18

(d) If the requirements of subsections (c) and (g) are satisfied, the Commission shall permit a declaration regarding the issue or sale of a security to become effective unless the Commission finds that— (1) the security is not reasonably adapted to the security structure of the declarant and other companies in the same holding-company system; (2) the security is not reasonably adapted to the earning power of the declarant; (3) financing by the issue and sale of the particular secu- rity is not necessary or appropriate to the economical and effi- cient operation of a business in which the applicant lawfully is engaged or has an interest; (4) the fees, commissions, or other remuneration, to whom- soever paid, directly or indirectly, in connection with the issue, sale, or distribution of the security are not reasonable; (5) in the case of a security that is a guaranty of, or assumption of liability on, a security of another company, the circumstances are such as to constitute the making of such guaranty or the assumption of such liability an improper for the declarant; or (6) the terms and conditions of the issue or sale of the security are detrimental to the public interest or the interest of investors or consumers. (e) If the requirements of subsection (g) are satisfied, the Com- mission shall permit a declaration to become effective regarding the exercise of a privilege or right to alter the priorities, preferences, voting power, or other rights of the holders of an outstanding secu- rity unless the Commission finds that such exercise of such privi- lege or right will result in an unfair or inequitable distribution of voting power among holders of the securities of the declarant or is otherwise detrimental to the public interest or the interest of inves- tors or consumers. (f) Any order permitting a declaration to become effective may contain such terms and conditions as the Commission finds nec- essary to assure compliance with the conditions specified in this section. (g) If a State commission or State securities commission, hav- ing jurisdiction over any of the acts enumerated in subsection (a) of section 6, shall inform the Commission, upon request by the Commission for an opinion or otherwise, that State laws applicable to the act in question have not been complied with, the Commission shall not permit a declaration regarding the act in question to be- come effective until and unless the Commission is satisfied that such compliance has been effected.

ACQUIRING INTEREST IN ELECTRIC AND GAS UTILITY COMPANIES SERVING SAME TERRITORY

SEC. 8. ø79h¿ Whenever a State law prohibits, or requires ap- proval or authorization of, the ownership or operation by a single company of the utility assets of an electric utility company and a gas utility company serving substantially the same territory, it shall be unlawful for a registered holding company, or any sub- 19P.U.H.C.A. of 1935 Sec. 9 sidiary company thereof, by use of the mails or any means or instrumentality of interstate commerce, or otherwise— (1) to take any step, without the express approval of the State commission of such State, which results in its having a direct or indirect interest in an electric utility company and a gas utility company serving substantially the same territory; or (2) if it already has any such interest, to acquire, without the express approval of the State commission, any direct or in- direct interest in an electric utility company or gas utility com- pany serving substantially the same territory as that served by such companies in which it already has an interest.

ACQUISITION OF SECURITIES AND UTILITY ASSETS AND OTHER INTERESTS

SEC. 9. ø79i¿ (a) Unless the acquisition has been approved by the Commission under section 10, it shall be unlawful— (1) for any registered holding company or any subsidiary company thereof, by use of the mails or any means or instru- mentality of interstate commerce, or otherwise, to acquire, di- rectly or indirectly, any securities or utility assets or any other interest in any business; (2) for any person, by use of the mails or any means or instrumentality of interstate commerce, to acquire, directly or indirectly, any security of any public-utility company, if such person is an affiliate, under clause (A) of paragraph (11) of subsection (a) of section 2, of such company and of any other public utility or holding company, or will by virtue of such ac- quisition become such an affiliate. (b) Subsection (a) shall not apply to— (1) the acquisition by a public-utility company of utility as- sets the acquisition of which has been expressly authorized by a State commission; or (2) the acquisition by a public-utility company of securities of a subsidiary public-utility company thereof, provided that both such public-utility companies and all other public-utility companies in the same holding-company system are organized in the same State, that the business of each such company in such system is substantially confined to such State, and that the acquisition of such securities has been expressly authorized by the State commission of such State. (c) Subsection (a) shall not apply to the acquisition by a reg- istered holding company, or a subsidiary company thereof, of— (1) securities of, or securities the principal or interest of which is guaranteed by, the United States, a State, or political subdivision of a State, or any agency, authority, or instrumen- tality of any one or more of the foregoing, or any corporation which is wholly owned, directly or indirectly, by any one or more of the foregoing; (2) such other readily marketable securities, within the limitation of such amounts, as the Commission may by rules and regulations prescribe as appropriate for investment of cur- rent funds and as not detrimental to the public interest or the interest of investors or consumers; or Sec. 10 P.U.H.C.A. of 1935 20

(3) such commercial paper and other securities, within such limitations, as the Commission may by rules and regula- tions or order prescribe as appropriate in the ordinary course of business of a registered holding company or subsidiary com- pany thereof and as not detrimental to the public interest or the interest of investors or consumers.

APPROVAL OF ACQUISITION OF SECURITIES AND UTILITY ASSETS AND OTHER INTERESTS

SEC. 10. ø79j¿ (a) A person may apply for approval of the ac- quisition of securities or utility assets, or of any other interest in any business, by filing an application in such form as the Commis- sion may by rules and regulations prescribe as necessary or appro- priate in the public interest or for the protection of investors and consumers. Such application shall include— (1) in the case of the acquisition of securities, such infor- mation and copies of such documents as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of inves- tors or consumers in respect of— (A) the security to be acquired, the consideration to be paid therefor, and compliance with such State laws as may apply in respect of the issue, sale, or acquisition thereof, (B) the outstanding securities of the company whose security is to be acquired, the terms, position, rights, and privileges of each class and the options in respect of any such securities, (C) the names of all security holders of record (or oth- erwise known to the applicant) owning, holding, or control- ling 1 per centum or more of any class of security of such company, the officers and directors of such company, and their remuneration, security holdings in, material con- tracts with, and borrowings from such company and the of- fices or directorships held, and securities owned, held, or controlled, by them in other companies, (D) the bonus, profit-sharing and voting-trust agree- ments, underwriting arrangements, trust indentures, mortgages, and similar documents, by whatever name known, of or relating to such company, (E) the material contracts, not made in the ordinary course of business, and the service, sales, and construction contracts of such company, (F) the securities owned, held, or controlled, directly or indirectly, by such company, (G) balance sheets and profit and loss statements of such company for not more than the five preceding fiscal years, certified, if required by the rules and regulations of the Commission by an independent public accountant, (H) any further information regarding such company and any associate company or affiliate thereof, or its rela- tions with the applicant company, and (I) if the applicant be not a registered holding com- pany, any of the information and documents which may be 21P.U.H.C.A. of 1935 Sec. 10

required under section 5 from a registered holding com- pany; (2) in the case of the acquisition of utility assets, such information concerning such assets, the value thereof and con- sideration to be paid therefor, the owner or owners thereof and their relation to, agreements with, and interest in the securi- ties of, the applicant or any associate company thereof as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the pro- tection of investors or consumers; and (3) in the case of the acquisition of any other interest in any business, such information concerning such business and the interest to be acquired, and the consideration to be paid, as the Commission may by rules and regulations or order pre- scribe as necessary or appropriate in the public interest or for the protection of investors or consumers. (b) If the requirements of subsection (f) are satisfied, the Com- mission shall approve the acquisition unless the Commission finds that— (1) such acquisition will tend towards interlocking rela- tions or the concentration of control of public-utility companies, of a kind or to an extent detrimental to the public interest or the interest of investors, or consumers; (2) in case of the acquisition of securities or utility assets, the consideration, including all fees, commissions, and other remuneration, to whomsoever paid, to be given, directly or in- directly, in connection with such acquisition is not reasonable or does not bear a fair relation to the sums invested in or the earning capacity of the utility assets to be acquired or the util- ity assets underlying the securities to be acquired; or (3) such acquisition will unduly complicate the of the holding-company system of the applicant or will be detrimental to the public interest or the interest of investors or consumers or the proper functioning of such hold- ing-company system. The Commission may condition its approval of the acquisition of securities of another company upon such a fair offer to purchase such of the other securities of the company whose security is to be acquired as the Commission may find necessary or appropriate in the public interest or for the protection of investors or consumers. (c) Notwithstanding the provisions of subsection (b), the Com- mission shall not approve— (1) an acquisition of securities or utility assets, or of any other interest, which is unlawful under the provisions of sec- tion 8 or is detrimental to the carrying out of the provisions of section 11; or (2) the acquisition of securities or utility assets of a public- utility or holding company unless the Commission finds that such acquisition will serve the public interest by tending to- wards the economical and efficient development of an inte- grated public-utility system. This paragraph shall not apply to the acquisition of securities or utility assets of a public-utility company operating exclusively outside the United States. Sec. 11 P.U.H.C.A. of 1935 22

(d) Within such reasonable time after the filing of an applica- tion under this section as the Commission shall fix by rules and regulations or order, the Commission shall enter an order either granting or, after notice and opportunity for hearing, denying ap- proval of the acquisition unless the applicant shall withdraw its ap- plication. Amendments to an application may be made upon such terms and conditions as the Commission may prescribe. (e) The Commission, in any order approving the acquisition of securities or utility assets, may prescribe such terms and condi- tions in respect of such acquisition, including the price to be paid for such securities or utility assets, as the Commission may find necessary or appropriate in the public interest or for the protection of investors or consumers. (f) The Commission shall not approve any acquisition as to which an application is made under this section unless it appears to the satisfaction of the Commission that such State laws as may apply in respect of such acquisition have been complied with, ex- cept where the Commission finds that compliance with such State laws would be detrimental to the carrying out of the provisions of section 11.

SIMPLIFICATION OF HOLDING-COMPANY SYSTEMS

SEC. 11. ø79k¿ (a) It shall be the duty of the Commission to examine the corporate structure of every registered holding com- pany and subsidiary company thereof, the relationships among the companies in the holding-company system of every such company and the character of the interests thereof and the properties owned or controlled thereby to determine the extent to which the cor- porate structure of such holding-company system and the compa- nies therein may be simplified, unnecessary complexities therein eliminated, voting power fairly and equitably distributed among the holders of securities thereof, and the properties and business thereof confined to those necessary or appropriate to the operations of an integrated public-utility system. (b) It shall be the duty of the Commission, as soon as prac- ticable after January 1, 1938: (1)1 To require by order, after notice and opportunity for hearing, that each registered holding company, and each sub-

1 Public Law 99–186 (99 Stat. 1180; 15 U.S.C. 79k note), entitled ‘‘An Act to clarify the appli- cation of the Public Utility Holding Company Act of 1935 to encourage cogeneration activities by gas utility holding company systems,’’ as amended by Public Law 99–553 (100 Stat. 3087) and Public Law 102–486 (106 Stat. 2911), provides as follows: ‘‘SECTION 1. Notwithstanding section 11(b)(1) of the Public Utility Holding Company Act of 1935, a company registered under said Act, or a subsidiary company of such registered company, may acquire or retain, in any geographic area, an interest in any qualifying cogeneration facili- ties and qualifying small power production facilities as defined pursuant to the Public Utility Regulatory Policies Act of 1978, and shall qualify for any exemption relating to the Public Util- ity Holding Company Act of 1935 prescribed pursuant to section 210 of the Public Utility Regu- latory Policies Act of 1978. ‘‘SEC. 2. Nothing herein shall be construed to affect the applicability of section 3(17)(C) or sec- tion 3(18)(B) of the Federal Power Act or any provision of the Public Utility Holding Company Act of 1935, other than section 11(b)(1), to the acquisition or retention of any such interest by any such company.’’ Public Law 101–572 (104 Stat. 2810; 15 U.S.C. 79k note), entitled ‘‘Gas Related Activities Act of 1990’’ provides as follows: 23P.U.H.C.A. of 1935 Sec. 11

sidiary company thereof, shall take such action as the Commis- sion shall find necessary to limit the operations of the holding- company system of which such company is a part to a single integrated public-utility system, and to such other businesses as are reasonably incidental, or economically necessary or ap- propriate to the operations of such integrated public-utility sys- tem: Provided, however, That the Commission shall permit a registered holding company to continue to control one or more additional integrated public-utility systems, if, after notice and opportunity for hearing, it finds that— (A) Each of such additional systems cannot be oper- ated as an independent system without the loss of sub- stantial economies which can be secured by the retention of control by such holding company of such system; (B) All of such additional systems are located in one State, or in adjoining States, or in a contiguous foreign country; and (C) The continued combination of such systems under the control of such holding company is not so large (consid- ering the state of the art and the area or region affected) as to impair the advantages of localized management, effi- cient operation, or the effectiveness of regulation. The Commission may permit as reasonably incidental, or eco- nomically necessary or appropriate to the operations of one or more integrated public-utility systems the retention of an in- terest in any business (other than the business of a public-util- ity company as such) which the Commission shall find nec- essary or appropriate in the public interest or for the protec-

SEC. 2. RULE OF CONSTRUCTION. (a) TREATMENT OF CERTAIN ACQUISITIONS INVOLVING GAS COMPANIES OR GAS TRANSPOR- TATION OR STORAGE.—The acquisition by a registered company of any interest in any natural gas company or of any interest in any company organized to participate in activities involving the transportation or storage of natural gas, shall be deemed, for the purposes of section 11(b)(1) of the Act, to be reasonably incidental or economically necessary or appropriate to the operation of such gas utility companies. (b) TREATMENT OF ACQUISITIONS RELATED TO SUPPLY OF NATURAL GAS; COMMISSION DETER- MINATION OF CUSTOMER INTEREST.—The acquisition by a registered company of any interest in any company organized to participate in activities (other than those of a natural gas company or involving the transportation or storage of natural gas) related to the supply of natural gas, including exploration, development, production, marketing, manufacture, or other similar activi- ties related to the supply of natural or manufactured gas, shall be deemed, for purposes of sec- tion 11(b)(1) of the Act, to be reasonably incidental or economically necessary or appropriate to the operation of such gas utility companies, if— (1) the Commission determines, after notice and opportunity for hearing in which the company proposing the acquisition shall have the burden of proving, that such acquisition is in the interest of consumers of each gas utility company of such registered company or consumers of any other subsidiary of such registered company; and (2) the Commission determines that such acquisition will not be detrimental to the inter- est of consumers of any such gas utility company or other subsidiary or to the proper func- tioning of the registered holding company system. (c) CASE-BY-CASE DECISIONS REQUIRED.—Each such determination under this section shall be made on a case-by-case basis, and not be based on any preset criteria. (d) SAVINGS PROVISION.—Nothing herein shall be construed to affect the applicability of any other provisions of the Act to the acquisition or retention of any such interest by any such com- pany. (e) DEFINITIONS.—For purposes of this section— (1) the term ‘‘registered company’’ means a company registered under the Act solely by reason of direct or indirect ownership of voting securities of one or more gas utility compa- nies, or any subsidiary company of such registered company; (2) the term ‘‘natural gas company’’ has the meaning given such term under the Natural Gas Act (15 U.S.C. 717(a) et seq.); and (3) the term ‘‘the Act’’ means the Public Utility Holding Company Act of 1935. Sec. 11 P.U.H.C.A. of 1935 24

tion of investors or consumers and not detrimental to the proper functioning of such system or systems. (2) To require by order, after notice and opportunity for hearing, that each registered holding company, and each sub- sidiary company thereof, shall take such steps as the Commis- sion shall find necessary to ensure that the corporate structure or continued existence of any company in the holding-company system does not unduly or unnecessarily complicate the struc- ture, or unfairly or inequitably distribute voting power among security holders, of such holding-company system. In carrying out the provisions of this paragraph the Commission shall re- quire each registered holding company (and any company in the same holding-company system with such holding company) to take such action as the Commission shall find necessary in order that such holding company shall cease to be a holding company with respect to each of its subsidiary companies which itself has a subsidiary company which is a holding com- pany. Except for the purpose of fairly and equitably distrib- uting voting power among the security holders of such com- pany, nothing in this paragraph shall authorize the Commis- sion to require any change in the corporate structure or exist- ence of any company which is not a holding company, or of any company whose principal business is that of a public-utility company. The Commission may by order revoke or modify any order pre- viously made under this subsection, if, after notice and opportunity for hearing, it finds that the conditions upon which the order was predicated do not exist. Any order made under this subsection shall be subject to judicial review as provided in section 24. (c) Any order under subsection (b) shall be complied with within one year from the date of such order; but the Commission shall, upon a showing (made before or after the entry of such order) that the applicant has been or will be unable in the exercise of due diligence to comply with such order within such time, extend such time for an additional period not exceeding one year if it finds such extension necessary or appropriate in the public interest or for the protection of investors or consumers. (d) The Commission may apply to a court, in accordance with the provisions of subsection (f) of section 18, to enforce compliance with any order issued under subsection (b). In any such proceeding, the court as a court of may, to such extent as it deems nec- essary for purposes of enforcement of such order, take exclusive jurisdiction and possession of the company or companies and the assets thereof, wherever located; and the court shall have jurisdic- tion, in any such proceeding, to appoint a trustee, and the court may constitute and appoint the Commission as sole trustee, to hold or administer under the direction of the court the assets so pos- sessed. In any proceeding for the enforcement of an order of the Commission issued under subsection (b), the trustee with the ap- proval of the court shall have power to dispose of any or all of such assets and, subject to such terms and conditions as the court may prescribe, may make such disposition in accordance with a fair and equitable reorganization plan which shall have been approved by the Commission after opportunity for hearing. Such reorganization 25P.U.H.C.A. of 1935 Sec. 11 plan may be proposed in the first instance by the Commission, or, subject to such rules and regulations as the Commission may deem necessary or appropriate in the public interest or for the protection of investors, by any person having a bona fide interest (as defined by the rules and regulations of the Commission) in the reorganiza- tion. (e) In accordance with such rules and regulations or order as the Commission may deem necessary or appropriate in the public interest or for the protection of investors or consumers, any reg- istered holding company or any subsidiary company of a registered holding company may, at any time after January 1, 1936, submit a plan to the Commission for the of control, securities, or other assets, or for other action by such company or any sub- sidiary company thereof for the purpose of enabling such company or any subsidiary company thereof to comply with the provisions of subsection (b). If, after notice and opportunity for hearing, the Commission shall find such plan, as submitted or as modified, nec- essary to effectuate the provisions of subsection (b) and fair and equitable to the persons affected by such plan, the Commission shall make an order approving such plan; and the Commission, at the request of the company, may apply to a court, in accordance with the provisions of subsection (f) of section 18, to enforce and carry out the terms and provisions of such plan. If, upon any such application, the court, after notice and opportunity for hearing, shall approve such plan as fair and equitable and as appropriate to effectuate the provisions of section 11, the court as a court of eq- uity may, to such extent as it deems necessary for the purpose of carrying out the terms and provisions of such plan, take exclusive jurisdiction and possession of the company or companies and the assets thereof, wherever located; and the court shall have jurisdic- tion to appoint a trustee, and the court may constitute and appoint the Commission as sole trustee, to hold or administer, under the direction of the court and in accordance with the plan theretofore approved by the court and the Commission, the assets so possessed. (f) In any proceeding in a court of the United States, whether under this section or otherwise, in which a receiver or trustee is appointed for any registered holding company, or any subsidiary company thereof, the court may constitute and appoint the Com- mission as sole trustee or receiver, subject to the directions and or- ders of the court, whether or not a trustee or receiver shall thereto- fore have been appointed, and in any such proceeding the court shall not appoint any person other than the Commission trustee or receiver without notifying the Commission and giving it an oppor- tunity to be heard before making any such appointment. In no pro- ceeding under this section or otherwise shall the Commission be appointed as trustee or receiver without its express consent. In any such proceeding a reorganization plan for a registered holding com- pany or any subsidiary company thereof shall not become effective unless such plan shall have been approved by the Commission after opportunity for hearing prior to its submission to the court. Notwithstanding any other provision of law, any such reorganiza- tion plan may be proposed in the first instance by the Commission or, subject to such rules and regulations as the Commission may deem necessary or appropriate in the public interest or for the pro- Sec. 12 P.U.H.C.A. of 1935 26 tection of investors, by any person having a bona fide interest (as defined by the rules and regulations of the Commission) in the re- organization. The Commission may, by such rules and regulations or order as it may deem necessary or appropriate in the public in- terest or for the protection of investors or consumers, require that any or all fees, , and remuneration, to whomsoever paid, in connection with any reorganization, dissolution, liquidation, bankruptcy, or receivership of a registered holding company or sub- sidiary company thereof, in any such proceeding, shall be subject to approval by the Commission. (g) It shall be unlawful for any person to solicit or permit the use of his or its name to solicit, by use of the mails or any means or instrumentality of interestate commerce, or otherwise, any proxy, consent, authorization, power of attorney, deposit, or dissent in respect of any reorganization plan of a registered holding com- pany or any subsidiary company thereof under this section, or oth- erwise, or in respect of any plan under this section for the divest- ment of control, securities, or other assets, or for the dissolution of any registered holding company or any subsidiary company thereof, unless— (1) the plan has been proposed by the Commission, or the plan and such information regarding it and its sponsors as the Commission may deem necessary or appropriate in the public interest or for the protection of investors or consumers has been submitted to the Commission by a person having a bona fide interest (as defined by the rules and regulations of the Commission) in such reorganization; (2) each such solicitation is accompanied or preceded by a copy of a report on the plan which shall be made by the Com- mission after an opportunity for a hearing on the plan and other plans submitted to it, or by an abstract of such report made or approved by the Commission; and (3) each such solicitation is made not in contravention of such rules and regulations or orders as the Commission may deem necessary or appropriate in the public interest or for the protection of investors or consumers. Nothing in this subsection or the rules and regulations thereunder shall prevent any person from appearing before the Commission or any court through an attorney or proxy. INTERCOMPANY LOANS; DIVIDENDS; SECURITY TRANSACTIONS; SALE OF UTILITY ASSETS; PROXIES; OTHER TRANSACTIONS SEC. 12. ø79l¿ (a) It shall be unlawful for any registered hold- ing company, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, directly or indirectly, to bor- row, or to receive any extension of credit or indemnity, from any public-utility company in the same holding-company system or from any subsidiary company of such holding company, but it shall not be unlawful under this subsection to renew, or extend the time of, any loan, credit, or indemnity outstanding on the date of the enactment of this title. (b) It shall be unlawful for any registered holding company or subsidiary company thereof, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, directly or in- 27P.U.H.C.A. of 1935 Sec. 12 directly, to lend or in any manner extend its credit to or indemnify any company in the same holding-company system in contravention of such rules and regulations or orders as the Commission deems necessary or appropriate in the public interest or for the protection of investors or consumers or to prevent the circumvention of the provisions of this title or the rules, regulations, or orders there- under. (c) It shall be unlawful for any registered holding company or any subsidiary company thereof, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, to declare or pay any dividend on any security of such company or to acquire, retire, or redeem any security of such company, in contravention of such rules and regulations or orders as the Commission deems nec- essary or appropriate to protect the financial integrity of companies in holding-company systems, to safeguard the working capital of public-utility companies, to prevent the payment of dividends out of capital or unearned surplus, or to prevent the circumvention of the provisions of this title or the rules, regulations, or orders there- under. (d) It shall be unlawful for any registered holding company, by use of the mails or any means or instrumentality of interstate com- merce, or otherwise, to sell any security which it owns of any pub- lic-utility company, or any utility assets, in contravention of such rules and regulations or orders regarding the consideration to be received for such sale, maintenance of competitive conditions, fees and commissions, accounts, disclosure of interest, and similar mat- ters as the Commission deems necessary or appropriate in the pub- lic interest or for the protection of investors or consumers or to pre- vent the circumvention of the provisions of this title or the rules, regulations, or orders thereunder. (e) It shall be unlawful for any person to solicit or to permit the use of his or its name to solicit, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, any proxy, power of attorney, consent, or authorization regarding any security of a registered holding company or a subsidiary company thereof in contravention of such rules and regulations or orders as the Commission deems necessary or appropriate in the public inter- est or for the protection of investors or consumers or to prevent the circumvention of the provisions of this title or the rules, regula- tions, or orders thereunder. (f) It shall be unlawful for any registered holding company or subsidiary company thereof, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, to negotiate, enter into, or take any step in the performance of any transaction not otherwise unlawful under this title, with any company in the same holding-company system or with any affiliate of a company in such holding-company system in contravention of such rules and regulations or orders regarding reports, accounts, costs, mainte- nance of competitive conditions, a disclosure of interest, duration of contracts, and similar matters as the Commission deems necessary or appropriate in the public interest or for the protection of inves- tors or consumers or to prevent the circumvention of the provisions of this title or the rules and regulations thereunder. Sec. 12 P.U.H.C.A. of 1935 28

(g) It shall be unlawful for any affiliate of any public-utility company, by use of the mails or any means or instrumentality of interstate commerce, or for any affiliate of any public-utility com- pany engaged in interstate commerce, or of any registered holding company or any subsidiary company thereof, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, to negotiate, enter into, or take any step in the performance of any transaction not otherwise unlawful under this title, with any such company of which it is an affiliate, in contravention of such rules and regulations or orders regarding reports, accounts, costs, main- tenance of competitive conditions, disclosure of interest, duration of contracts, and similar matters as the Commission deems necessary or appropriate to prevent the circumvention of the provisions of this title. (h) It shall be unlawful for any registered holding company, or any subsidiary company thereof, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, directly or indirectly— (1) to make any contribution whatsoever in connection with the candidacy, nomination, election or appointment of any person for or to any office or position in the of the United States, a State, or any political subdivision of a State, or any agency, authority, or instrumentality of any one or more of the foregoing; or (2) to make any contribution to or in support of any polit- ical party or any committee or agency thereof. The term ‘‘contribution’’ as used in this subsection includes any gift, subscription, loan, advance, or deposit of money or anything of value, and includes any contract, agreement, or promise, whether or not legally enforceable, to make a contribution. (i) It shall be unlawful for any person employed or retained by any registered holding company, or any subsidiary company thereof, to present, advocate, or oppose any matter affecting any registered holding company or any subsidiary company thereof, be- fore the Congress or any Member or committee thereof, or before the Commission or Federal Power Commission, or any member, of- ficer, or employee of either such Commission, unless such person shall file with the Commission in such form and detail and at such time as the Commission shall by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers, a statement of the subject matter in respect of which such person is retained or employed, the nature and character of such retainer or employment, and the amount of compensation received or to be received by such person, directly or indirectly, in connection therewith. It shall be the duty of every such person so employed or retained to file with the Com- mission within ten days after the close of each calendar month dur- ing such retainer or employment, in such form and detail as the Commission shall by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers, a statement of the expenses incurred and the compensation received by such person during such month in connection with such retainer or employment. 29P.U.H.C.A. of 1935 Sec. 13

SERVICE, SALES, AND CONSTRUCTION CONTRACTS SEC. 13. ø79m¿ (a) After April 1, 1936, it shall be unlawful for any registered holding company, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, to enter into or take any step in the performance of any service, sales, or construction contract by which such company undertakes to per- form services or construction work for, or sell goods to, any asso- ciate company thereof which is a public-utility or mutual service company. This provision shall not apply to such transactions, in- volving special or unusual circumstances or not in the ordinary course of business, as the Commission by rules and regulations or order may conditionally or unconditionally exempt as being nec- essary or appropriate in the public interest or for the protection of investors or consumers. (b) After April 1, 1936, it shall be unlawful for any subsidiary company of any registered holding company or for any mutual serv- ice company, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, to enter into or take any step in the performance of any service, sales, or construction contract by which such company undertakes to perform services or construction work for, or sell goods to, any associate company thereof except in accordance with such terms and conditions and subject to such lim- itations and prohibitions as the Commission by rules and regula- tions or order shall prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers and to insure that such contracts are performed economically and effi- ciently for the benefit of such associate companies at cost, fairly and equitably allocated among such companies. This provision shall not apply to such transactions as the Commission by rules and reg- ulations or order may conditionally or unconditionally exempt as being necessary or appropriate in the public interest or for the pro- tection of investors or consumers, if such transactions (1) are with any associate company which does not derive, directly or indirectly, any material part of its income from sources within the United States and which is not a public-utility company operating within the United States, or (2) involve special or unusual circumstances or are not in the ordinary course of business. (c) The rules and regulations and orders of the Commission under this section may prescribe, among other things, such terms and conditions regarding the determination of costs and the alloca- tion thereof among specified classes of companies and for specified classes of service, sales, and construction contracts, the duration of such contracts, the making and keeping of accounts and cost-ac- counting procedures, the filing of annual and other periodic and special reports, the maintenance of competitive conditions, the dis- closure of interests, and similar matters, as the Commission deems necessary or appropriate in the public interest or for the protection of investors or consumers. (d) The rules and regulations and orders of the Commission under this section shall prescribe, among other things, such terms and conditions regarding the manner in which application may be made for approval as a mutual service company and the granting and continuance of such approval, the nature and enforcement of Sec. 13 P.U.H.C.A. of 1935 30 agreements for the sharing of expenses and distributing of reve- nues among member companies, and matters relating to such agreements, the nature and types of businesses and transactions in which mutual service companies may engage, and the manner of engaging therein, and the relations and transactions with member companies and affiliates, as the Commission deems necessary or appropriate in the public interest or for the protection of investors or consumers. The Commission shall not approve, or continue the approval of, any company as a mutual service company unless the Commission finds such company is so organized as to ownership, costs, revenues, and the sharing thereof as reasonably to insure the efficient and economical performance of service, sales, or construc- tion contracts by such company for member companies, at cost fairly and equitably allocated among such member companies, at a reasonable saving to member companies over the cost to such com- panies of comparable contracts performed by independent persons. The Commission, upon its own motion or at the request of a mem- ber company or a State commission, may, after notice and oppor- tunity for hearing, by order require a reallocation or reapportion- ment of costs among member companies of a mutual service com- pany if it finds the existing allocation inequitable and may require the elimination of a service or services to a member company which does not bear its fair proportion of costs or which, by reason of its size or other circumstances, does not require such service or serv- ices. The Commission, after notice and opportunity for hearing, by order shall revoke, suspend, or modify the approval given any mu- tual service company if it finds that such company has persistently violated any provision of this section or any rule, regulation, or order thereunder. (e) It shall be unlawful for any affiliate of any public-utility company engaged in interstate commerce, or of any registered hold- ing company or subsidiary company thereof, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, to enter into or take any step in the performance of any service, sales, or construction contract, by which such affiliate undertakes to perform services or construction work for, or sell goods to, any such company of which it is an affiliate, in contravention of such rules and regulations or orders regarding reports, accounts, costs, maintenance of competitive conditions, disclosure of interest, dura- tion of contracts, and similar matters, as the Commission deems necessary or appropriate to prevent the circumvention of the provi- sions of this title or the rules, regulations, or orders thereunder. (f) It shall be unlawful for any person whose principal business is the performance of service, sales, or construction contracts for public-utility or holding companies, by use of the mails or any means or instrumentality of interstate commerce, to enter into or take any step in the performance of any service, sales, or construc- tion contract with any public-utility company, or for any such per- son, by use of the mails or any means or instrumentality of inter- state commerce, or otherwise, to enter into or take any step in the performance of any service, sales, or construction contract with any public-utility company engaged in interstate commerce, or with any registered holding company or any subsidiary company of a reg- istered holding company, in contravention of such rules and regula- 31P.U.H.C.A. of 1935 Sec. 15 tions or orders regarding reports, accounts, costs, maintenance of competitive conditions, disclosure of interest, duration of contracts, and similar matters as the Commission deems necessary or appro- priate in the public interest or for the protection of investors or consumers or to prevent the circumvention of the provisions of this title or the rules, regulations, or orders thereunder. (g) The Commission, in order to obtain information to serve as a basis for recommending further legislation, shall from time to time conduct investigations regarding the making, performance, and costs of service, sales, and construction contracts with holding companies and subsidiary companies thereof and with public-utility companies, the economies resulting therefrom, and the desirability thereof. The Commission shall report to Congress, from time to time, the results of such investigations, together with such rec- ommendations for legislation as it deems advisable. On the basis of such investigations the Commission shall classify the different types of such contracts and the work done thereunder, and shall make recommendations from time to time regarding the standards and scope of such contracts in relation to public-utility companies of different kinds and sizes and the costs incurred thereunder and economies resulting therefrom. Such recommendations shall be made available to State commissions, public-utility companies, and to the public in such form and at such reasonable charge as the Commission may prescribe.

PERIODIC AND OTHER REPORTS

SEC. 14. ø79n¿ Every registered holding company and every mutual service company shall file with the Commission such an- nual, quarterly, and other periodic and special reports, the answers to such specific questions and the minutes of such directors’, stock- holders’, and other meetings, as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors or consumers. Such reports, if required by the rules and regulations of the Commission, shall be certified by an independent public accountant, and shall be made and filed at such time and in such form and detail as the Commission shall prescribe. The Commission may require that there be included in reports filed with it such information and doc- uments as it finds necessary or appropriate to keep reasonably cur- rent the information filed under section 5 or 13, and such further information concerning the financial condition, security structure, security holdings, assets, and cost thereof, wherever determinable, and affiliations of the reporting company and the associate compa- nies, member companies, and affiliates thereof as the Commission deems necessary or appropriate in the public interest or for the protection of investors or consumers.

ACCOUNTS AND RECORDS

SEC. 15. ø79o¿ (a) Every registered holding company and every subsidiary company thereof shall make, keep, and preserve for such periods, such accounts, cost-accounting procedures, cor- respondence, memoranda, papers, books, and other records as the Commission deems necessary or appropriate in the public interest Sec. 15 P.U.H.C.A. of 1935 32 or for the protection of investors or consumers or for the enforce- ment of the provisions of this title or the rules, regulations, or or- ders thereunder. (b) Every affiliate of a registered holding company or of any subsidiary company thereof, or of any public-utility company en- gaged in interstate commerce or not so engaged, shall make, keep, and preserve for such periods, such accounts, cost-accounting proce- dures, correspondence, memoranda, papers, books, and other records relating to any transaction of such affiliate which is subject to any provision of this title or any rule, regulation, or order there- under, as the Commission deems necessary or appropriate in the public interest or for the protection of investors or consumers or for the enforcement of the provisions of this title or the rules, regula- tions, or orders thereunder. (c) Every mutual service company, and every affiliate of a mu- tual service company as to any transaction of such affiliate which is subject to any provision of this title or any rule, regulation, or order thereunder, shall make, keep, and preserve for such periods, such accounts, cost-accounting procedures, correspondence, memo- randa, papers, books, and other records, as the Commission deems necessary or appropriate in the public interest or for the protection of investors or consumers or for the enforcement of the provisions of this title or the rules, regulations, or orders thereunder. (d) Every person whose principal business is the performance of service, sales, or construction contracts for public-utility or hold- ing companies shall make, keep, and preserve for such periods, such accounts, cost-accounting procedures, correspondence, memo- randa, papers, books, and other records, relating to any transaction by such person which is subject to any provision of this title or any rule, regulation, or order thereunder, as the Commission deems necessary or appropriate in the public interest or for the protection of investors or consumers or for the enforcement of the provisions of this title or the rules and regulations thereunder. (e) After the Commission has prescribed the form and manner of making and keeping accounts, cost-accounting procedures, cor- respondence, memoranda, papers, books, and other records to be kept by any person hereunder, it shall be unlawful for any such person to keep any accounts, cost-accounting procedures, cor- respondence, memoranda, papers, books, or other records other than those prescribed or such as may be approved by the Commis- sion, or to keep his or its accounts, cost-accounting procedures, cor- respondence, memoranda, papers, books, or other records in any manner other than that prescribed or approved by the Commission. (f) All accounts, cost-accounting procedures, correspondence, memoranda, papers, books, and other records kept or required to be kept by persons subject to any provision of this section shall be subject at any time and from time to time to such reasonable peri- odic, special, and other examinations by the Commission, or any member or representative thereof, as the Commission may pre- scribe. The Commission, after notice and opportunity for hearing, may prescribe the account or accounts in which particular outlays, receipts, and other transactions shall be entered, charged, or cred- ited and the manner in which such entry, charge, or credit shall 33P.U.H.C.A. of 1935 Sec. 16 be made, and may require an entry to be modified or supplemented so as properly to show the cost of any asset or any other cost. (g) It shall be the duty of every registered holding company and of every subsidiary company thereof and of every affiliate of a company insofar as such affiliate is subject to any provision of this title or any rule, regulation, or order thereunder, to submit the ac- counts, cost-accounting procedures, correspondence, memoranda, papers, books, and other records of such holding company, sub- sidiary company, or affiliate, as the case may be, to such examina- tions, in person or by duly appointed attorney, by the holder of any security of such holding company, subsidiary company, or affiliate, as the case may be, as the Commission deems necessary or appro- priate in the public interest or for the protection of investors or consumers. (h) It shall be the duty of every mutual service company, and of every affiliate of a mutual service company, and of every person whose principal business is the performance of service, sales, or construction contracts for public-utility or holding companies, insofar as such affiliate or such person is subject to any provision of this title or any rule, regulation, or order thereunder, to submit the accounts, cost-accounting procedures, correspondence, memo- randa, papers, books, and other records of such mutual service company, affiliate, or person to such examinations, in person or by duly appointed attorney, by member companies of such mutual service company and by public-utility or holding companies for which such person performs service, sales, or construction contracts as the Commission deems necessary or appropriate in the public in- terest or for the protection of investors or consumers. (i) The Commission, by such rules and regulations as it deems necessary or appropriate in the public interest or for the protection of investors or consumers may prescribe for persons subject to the provisions of subsection (a), (b), (c), or (d) of this section uniform methods for keeping accounts required under any provision of this section, including, among other things, the manner in which the cost of all assets, whenever determinable, shall be shown, the methods of classifying and segregating accounts, and the manner in which cost-accounting procedures shall be maintained.

LIABILITY FOR MISLEADING STATEMENTS

SEC. 16. ø79p¿ (a) Any person who shall make or cause to be made any statement in any application, report, registration state- ment, or document filed pursuant to any provision of this title, or any rule, regulation, or order thereunder, which statement was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact shall be liable in the same manner, to the same extent, and subject to the same limitations as provided in section 18 of the Securities Ex- change Act of 1934 with respect to an application, report, or docu- ment filed pursuant to the Securities Exchange Act of 1934. (b) The rights and remedies provided by this title, except as provided in section 17(b), shall be in addition to any and all other rights and remedies that may exist under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, or oth- erwise at law or in equity; but no person permitted to maintain a Sec. 17 P.U.H.C.A. of 1935 34 suit for damages under the provisions of this title shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act com- plained of. OFFICERS, DIRECTORS, AND OTHER AFFILIATES SEC. 17. ø79q¿ (a) Every person who is an officer or director of a registered holding company shall file with the Commission in such form as the Commission shall prescribe (1) at the time of the registration of such holding company, or within ten days after such person becomes an officer or director, a statement of the securities of such registered holding company or any subsidiary company thereof of which he is, directly or indirectly, the beneficial owner, and (2) within ten days after the close of each calendar month thereafter, if there has been any change in such ownership during such month, a statement of such ownership as of the close of such calendar month and of the changes in such ownership that have oc- curred during such calendar month. (b) For the purpose of preventing the unfair use of information which may have been obtained by any such officer or director by reason of his relationship to such registered holding company or any subsidiary company thereof, any profit realized by any such of- ficer or director from any purchase and sale, or any sale and pur- chase, of any security of such registered holding company or any subsidiary company thereof within any period of less than six months, unless such security was acquired in good faith in connec- tion with a debt previously contracted, shall inure to and be recov- erable by the holding company or subsidiary company in respect of the security of which such profit was realized, irrespective of any intention on the part of such officer or director in entering into such transaction to hold the security purchased or not to repur- chase the security sold for a period of more than six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the company entitled thereto or by the owner of any security of such company in the name and in the behalf of such company if such company shall fail or refuse to bring such suit within sixty days after request or shall fail dili- gently to prosecute the same thereafter; but no such suit shall be brought more than two years after the date such profit was real- ized. This subsection shall not cover any transaction where such person was not an officer or director at the times of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may, as necessary or appropriate in the public interest or for the protection of investors or consumers, exempt as not com- prehended within the purpose of this subsection. Nothing in this subsection shall be construed to give a remedy in the case of any transaction in respect of which a remedy is given under subsection (b) of section 16 of the Securities Exchange Act of 1934. (c) After one year from the date of the enactment of this title, no registered holding company or any subsidiary company thereof shall have, as an officer or director thereof, any executive officer, director, partner, appointee, or representative of any bank, trust company, investment banker, or banking association or firm, or any 35P.U.H.C.A. of 1935 Sec. 18 executive officer, director, partner, appointee, or representative of any corporation a majority of whose stock, having the unrestricted right to vote for the election of directors, is owned by any bank, trust company, investment banker, or banking association or firm, except in such cases as rules and regulations prescribed by the Commission may permit as not adversely affecting the public inter- est or the interest of investors or consumers. INVESTIGATIONS; INJUNCTIONS, ENFORCEMENT OF TITLE, AND PROSECUTION OF OFFENSES

SEC. 18. ø79r¿ (a) The Commission, in its discretion, may investigate any facts, conditions, practices, or matters which it may deem necessary or appropriate to determine whether any person has violated or is about to violate any provision of this title or any rule or regulation thereunder, or to aid in the enforcement of the provisions of this title, in the prescribing of rules and regulations thereunder, or in obtaining information to serve as a basis for rec- ommending further legislation concerning the matters to which this title relates. The Commission may require or permit any person to file with it a statement in writing, under oath or otherwise as it shall determine, as to any or all facts and circumstances con- cerning a matter which may be the subject of investigation. The Commission, in its discretion, may publish, or make available to State commissions, information concerning any such subject. (b) The Commission upon its own motion or at the request of a State commission may investigate, or obtain any information re- garding the business, financial condition, or practices of any reg- istered holding company or subsidiary company thereof or facts, conditions, practices, or matters affecting the relations between any such company and any other company or companies in the same holding-company system. (c) For the purpose of any investigation or any other pro- ceeding under this title, any member of the Commission, or any of- ficer thereof designated by it, is empowered to administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, cor- respondence, memoranda, contracts, agreements, or other records which the Commission deems relevant or material to the inquiry. Such attendance of witnesses and the production of any such records may be required from any place in any State or in any Ter- ritory or other place subject to the jurisdiction of the United States at any designated place of hearing. (d) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Commission may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person re- sides or carries on business, in requiring the attendance and testi- mony of witnesses and the production of books, papers, correspond- ence, memoranda, contracts, agreements, and other records. And such court may issue an order requiring such person to appear be- fore the Commission or member or officer designated by the Com- mission, there to produce records, if so ordered, or to give testi- mony touching the matter under investigation or in question; and any failure to obey such order of the court may be punished by Sec. 19 P.U.H.C.A. of 1935 36 such court as a contempt thereof. All process in any such case may be served in the judicial district whereof such person is an inhab- itant or wherever he may be found. Any person who, without just cause, shall fail or refuse to attend and testify or to answer any lawful inquiry or to produce books, papers, correspondence, memo- randa, contracts, agreements, or other records, if in his or its power so to do, in obedience to the subpoena of the Commission, shall be guilty of a misdemeanor and, upon conviction, shall be subject to a fine of not more than $1,000 or to imprisonment for a term of not more than one year, or both. (e) Whenever it shall appear to the Commission that any per- son is engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions of this title, or of any rule, regulation, or order thereunder, it may in its discretion bring an action in the proper district court of the United States or the United States courts of any Territory or other place subject to the jurisdiction of the United States, to enjoin such acts or practices and to enforce compliance with this title or any rule, regulation, or order thereunder, and upon a proper showing a per- manent or temporary injunction or degree or restraining order shall be granted without bond. The Commission may transmit such evidence as may be available concerning such acts or practices to the Attorney General, who, in his discretion, may institute the appropriate criminal proceedings under this title. (f) Upon application of the Commission, the district courts of the United States, and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have jurisdiction to issue writs of mandamus commanding any per- son to comply with the provisions of this title or any rule, regula- tion, or order of the Commission thereunder.

HEARINGS BY COMMISSION

SEC. 19. ø79s¿ Hearings may be public and may be held before the Commission, any member or members thereof, or any officer or officers of the Commission designated by it, and appropriate records thereof shall be kept. In any proceeding before the Commis- sion, the Commission, in accordance with such rules and regula- tions as it may prescribe, shall admit as a party any interested State, State commission, State securities commission, municipality, or other political subdivision of a State, and may admit as a party any representative of interested consumers or security holders, or any other person whose participation in the proceedings may be in the public interest or for the protection of investors or consumers. RULES, REGULATIONS, AND ORDERS SEC. 20. ø79t¿ (a) The Commission shall have authority from time to time to make, issue, amend, and rescind such rules and regulations and such orders as it may deem necessary or appro- priate to carry out the provisions of this title, including rules and regulations defining accounting, technical, and trade terms used in this title. Among other things, the Commission shall have author- ity, for the purpose of this title, to prescribe the form or forms in which information required in any statement, declaration, applica- 37P.U.H.C.A. of 1935 Sec. 21 tion, report, or other document filed with the Commission shall be set forth, the items or details to be shown in balance sheets, profit and loss statements, and surplus accounts, the manner in which the cost of all assets, whenever determinable, shall be shown in re- gard to such statements, declarations, applications, reports, and other documents filed with the Commission, or accounts required to be kept by the rules, regulations, or orders of the Commission, and the methods to be followed in the keeping of accounts and cost- accounting procedures and the preparation of reports, in the seg- regation and allocation of costs, in the determination of liabilities, in the determination of and depletion, in the differen- tiation of recurring and nonrecurring income, in the differentiation of investment and operating income, and in the keeping or prepara- tion, where the Commission deems it necessary or appropriate, of separate or consolidated balance sheets or profit and loss state- ments for any companies in the same holding-company system. (b) In the case of the accounts of any company whose methods of accounting are prescribed under the provisions of any law of the United States or of any State, the rules and regulations or orders of the Commission in respect of accounts shall not be inconsistent with the requirements imposed by such law or any rule or regula- tion thereunder; nor shall anything in this title relieve any public- utility company from the duty to keep the accounts, books, records, or memoranda which may be required to be kept by the law of any State in which it operates or by the State commission of any such State. But this provision shall not prevent the Commission from imposing such additional requirements regarding reports or ac- counts as it may deem necessary or appropriate in the public inter- est or for the protection of investors or consumers. (c) The rules and regulations of the Commission shall be effec- tive upon publication in the manner which the Commission shall prescribe. For the purpose of its rules, regulations, or orders the Commission may classify persons and matters within its jurisdic- tion and prescribe different requirements for different classes of persons or matters. Orders of the Commission under this title shall be issued only after opportunity for hearing. (d) The Commission, by such rules and regulations or order as it deems necessary or appropriate in the public interest or for the protection of investors or consumers, may authorize the filing of any information or documents required to be filed with the Com- mission under this title, or under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, by incor- porating by reference any information or documents theretofore or concurrently filed with the Commission under this title or either of such Acts. No provision of this title imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation, or order of the Commission, notwithstanding that such rule, regulation, or order may, after such act or omission, be amended or rescinded or be determined by judicial or other au- thority to be invalid for any reason.

EFFECT ON EXISTING LAW

SEC. 21. ø79u¿ Nothing in this title shall affect (1) the jurisdic- tion of the Commission under the Securities Act of 1933, as Sec. 22 P.U.H.C.A. of 1935 38 amended, or the Securities Exchange Act of 1934 over any person, security, or contract, or (2) the rights, obligations, duties, or liabil- ities of any person under such Acts; nor shall anything in this title affect the jurisdiction of any other commission, board, agency, or of- ficer of the United States or of any State or political subdivision of any State, over any person, security, or contract, insofar as such jurisdiction does not conflict with any provision of this title or any rule, regulation, or order thereunder.

INFORMATION FILED WITH THE COMMISSION

SEC. 22. ø79v¿ (a) When in the judgment of the Commission the disclosure of such information would be in the public interest or the interest of investors or consumers, the information contained in any statement, application, declaration, report, or other docu- ment filed with the Commission shall be available to the public, and copies thereof may be furnished to any person at such reason- able charge and under such reasonable limitations as the Commis- sion may prescribe: Provided, however, That nothing in this title shall be construed to require, or to authorize the Commission to re- quire, the revealing of trade secrets or processes in any application, declaration, report, or document filed with the Commission under this title. (b) Any person filing such application, declaration, report, or document may make written objection to the public disclosure of information contained therein, stating the grounds for such objec- tion, and the Commission is authorized to hear objections in any such case where it finds it advisable. (c) It shall be unlawful for any member, officer, or employee of the Commission to disclose to any person other than a member, of- ficer, or employee of the Commission, or to use for personal benefit, any information contained in any application, declaration, report, or document filed with the Commission which is not made avail- able to the public pursuant to this section.

ANNUAL REPORTS OF COMMISSION

SEC. 23. ø79w¿ The Commission shall submit annually a re- to the Congress covering the work of the Commission for the preceding year and including such information, data, and rec- ommendations for further legislation in connection with the mat- ters covered by this title as it may find advisable.

COURT REVIEW OF ORDERS

SEC. 24. ø79x¿ (a) Any person or party aggrieved by an order issued by the Commission under this title may obtain a review of such order in the court of appeals of the United States within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such court, within sixty days after the entry of such order, a written petition praying that the order of the Commission be modified or set aside in whole or in part. A copy of such petition shall be forthwith transmitted by the clerk of the court to any member of the Commission, or any officer thereof des- ignated by the Commission for that purpose, and thereupon the 39P.U.H.C.A. of 1935 Sec. 25

Commission shall file in the court the record upon which the order complained of was entered, as provided in section 2112 of title 28, United States Code. Upon the filing of such petition such court shall have jurisdiction, which upon the filing of the record shall be exclusive, to affirm, modify, or set aside such order, in whole or in part. No objection to the order of the Commission shall be consid- ered by the court unless such objection shall have been urged be- fore the Commission or unless there were reasonable grounds for failure so to do. The findings of the Commissions as to the facts, if supported by substantial evidence, shall be conclusive. If applica- tion is made to the court for leave to adduce additional evidence, and it is shown to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the proceeding before the Com- mission, the court may order such additional evidence to be taken before the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission may modify its findings as to the facts by reason of the additional evidence so taken, and it shall file with the court such modified or new findings, which, if supported by substantial evidence, shall be conclusive, and its recommenda- tion, if any, for the modification or setting aside of the original order. The judgment and decree of the court affirming, modifying, or setting aside, in whole or in part, any such order of the Commis- sion shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in section 1254 of title 28, United States Code. (b) The commencement of proceedings under subsection (a) shall not, unless specifically ordered by the court, operate as a stay of the Commission’s order.

JURISDICTION OF OFFENSES AND SUITS

SEC. 25. ø79y¿ The District Courts of the United States and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have jurisdiction of viola- tions of this title or the rules, regulations, or orders thereunder, and, concurrently with State and Territorial courts, of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of, this title or the rules, regu- lations, or orders thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. Any suit or action to enforce any liability or duty created by, or to enjoin any violation of, this title or rules, reg- ulations, or orders thereunder, may be brought in any such district or in the district wherein the defendant is an inhabitant or trans- acts business, and process in such cases may be served in any dis- trict of which the defendant is an inhabitant or transacts business or wherever the defendant may be found. Judgments and decrees so rendered shall be subject to review as provided in sections 1254, 1291, 1292, and 1294 of title 28, United States Code. No costs shall be assessed for or against the Commission in any proceeding under this title brought by or against the Commission in any court. Sec. 26 P.U.H.C.A. of 1935 40

VALIDITY OF CONTRACTS

SEC. 26. ø79z¿ (a) Any condition, stipulation, or provision bind- ing any person to waive compliance with any provision of this title or with any rule, regulation, or order thereunder shall be void. (b) Every contract made in violation of any provision of this title or of any rule, regulation, or order thereunder, and every con- tract heretofore or hereafter made, the performance of which in- volves the violation of, or the continuance of any relationship or practice in violation of, any provision of this title, or any rule, regu- lation, or order thereunder, shall be void (1) as regards the rights of any person who, in violation of any such provision, rule, regula- tion, or order, shall have made or engaged in the performance of any such contract, and (2) as regards the rights of any person who, not being a party to such contract, shall have acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation of any such provision, rule, regulation, or order. (c) Nothing in this title shall be construed (1) to affect the va- lidity of any loan or extension of credit (or any extension or re- newal thereof) made or of any lien created prior or subsequent to the enactment of this title, unless at the time of the making of such loan or extension of credit (or extension or renewal thereof) or the creating of such lien, the person making such loan or extension of credit (or extension or renewal thereof) or acquiring such lien shall have actual knowledge of facts by reason of which the making of such loan or extension of credit (or extension or renewal thereof) or the acquisition of such lien as a violation of the provisions of this title or any rule or regulation thereunder, or (2) to afford a defense to the collection of any debt or obligation or the enforcement of any lien by any person who shall have acquired such debt, obligation, or lien in good faith for value and without actual knowledge of the violation of any provision of this title or any rule or regulation thereunder affecting the legality of such debt, obligation, or lien. LIABILITY OF CONTROLLING PERSONS; PREVENTING COMPLIANCE WITH TITLE

SEC. 27. ø79z–1¿ (a) It shall be unlawful for any person, di- rectly or indirectly, to cause to be done any act or thing through or by means of any other person which it would be unlawful for such person to do under the provisions of this title or any rule, reg- ulation, or order thereunder. (b) It shall be unlawful for any person without just cause to hinder, delay, or obstruct the making, filing, or keeping of any information, document, report, record, or account required to be made, filed, or kept under any provision of this title or any rule, regulation, or order thereunder.

UNLAWFUL REPRESENTATIONS

SEC. 28. ø79z–2¿ It shall be unlawful for any person in issuing, selling, or offering for sale any security of a registered holding com- pany or subsidiary company thereof, to represent or imply in any manner whatsoever that such security has been guaranteed, spon- 41P.U.H.C.A. of 1935 Sec. 31 sored, or recommended for investment by the United States or any agency or officer thereof.

PENALTIES 1

SEC. 29. ø79z–3¿ Any person who willfully violates any provi- sion of this title or any rule, regulation, or order thereunder (other than an order of the Commission under subsection (b), (d), (e), or (f) of section 11), or any person who willfully makes any statement or entry in an application, report, document, account, or record filed or kept or required to be filed or kept under the provisions of this title or any rule, regulation, or order thereunder, knowing such statement or entry to be false or misleading in any material re- spect, or any person who willfully destroys (except after such time as may be prescribed under any rules or regulations under this title), mutilates, alters, or by any means, or device falsifies any ac- count, correspondence, memorandum, book, paper, or other record kept or required to be kept under the provisions of this title or any rule, regulation, or order thereunder, shall upon conviction be fined not more than $10,000 or imprisoned not more than five years, or both, except that in the case of a violation of a provision of sub- section (a) or (b) of section 4 by a holding company which is not an individual, the fine imposed upon such holding company shall be a fine not exceeding $200,000; but no person shall be convicted under this section for the violation of any rule, regulation, or order if he proves that he had no knowledge of such rule, regulation, or order. STUDY OF PUBLIC-UTILITY AND INVESTMENT COMPANIES SEC. 30. ø79z–4¿ The Commission is authorized and directed to make studies and investigations of public-utility companies, the territories served or which can be served by public-utility compa- nies, and the manner in which the same are or can be served, to determine the sizes, types, and locations of public-utility companies which do or can operate most economically and efficiently in the public interest, in the interest of investors and consumers, and in furtherance of a wider and more economical use of gas and electric energy; upon the basis of such investigations and studies the Com- mission shall make public from time to time its recommendations as to the type and size of geographically and economically inte- grated public-utility systems which, having regard for the nature and character of the locality served, can best promote and har- monize the interests of the public, the , and the consumer.

HIRING AND LEASING AUTHORITY OF THE COMMISSION

SEC. 31. ø79z–5¿ The provisions of section 4(b) of the Securi- ties Exchange Act of 1934 shall be applicable with respect to the power of the Commission— (1) to appoint and fix the compensation of such employees as may be necessary for carrying out its functions under this title, and

1 See also 18 U.S.C. 3623. [Printed in appendix to this volume.] Sec. 32 P.U.H.C.A. of 1935 42

(2) to lease and allocate such real property as may be nec- essary for carrying out its functions under this title. SEC. 32. ø79z–5a¿ EXEMPT WHOLESALE GENERATORS. (a) DEFINITIONS.—For purposes of this section— (1) EXEMPT WHOLESALE GENERATOR.—The term ‘‘exempt wholesale generator’’ means any person determined by the Federal Energy Regulatory Commission to be engaged directly, or indirectly through one or more affiliates as defined in sec- tion 2(a)(11)(B), and exclusively in the business of owning or operating, or both owning and operating, all or part of one or more eligible facilities and selling electric energy at wholesale. No person shall be deemed to be an exempt wholesale gener- ator under this section unless such person has applied to the Federal Energy Regulatory Commission for a determination under this paragraph. A person applying in good faith for such a determination shall be deemed an exempt wholesale gener- ator under this section, with all of the exemptions provided by this section, until the Federal Energy Regulatory Commission makes such determination. The Federal Energy Regulatory Commission shall make such determination within 60 days of its receipt of such application and shall notify the Commission whenever a determination is made under this paragraph that any person is an exempt wholesale generator. Not later than 12 months after the date of enactment of this section, the Fed- eral Energy Regulatory Commission shall promulgate rules im- plementing the provisions of this paragraph. Applications for determination filed after the effective date of such rules shall be subject thereto. (2) ELIGIBLE FACILITY.—The term ‘‘eligible facility’’ means a facility, wherever located, which is either— (A) used for the generation of electric energy exclu- sively for sale at wholesale, or (B) used for the generation of electric energy and leased to one or more public utility companies; Provided, That any such lease shall be treated as a sale of electric energy at wholesale for purposes of sections 205 and 206 of the Federal Power Act. Such term shall not include any facility for which consent is required under subsection (c) if such consent has not been ob- tained. Such term includes interconnecting transmission facili- ties necessary to effect a sale of electric energy at wholesale. For purposes of this paragraph, the term ‘‘facility’’ may include a portion of a facility subject to the limitations of subsection (d) and shall include a facility the construction of which has not been commenced or completed. (3) SALE OF ELECTRIC ENERGY AT WHOLESALE.—The term ‘‘sale of electric energy at wholesale’’ shall have the same meaning as provided in section 201(d) of the Federal Power Act (16 U.S.C. 824(d)). (4) RETAIL RATES AND CHARGES.—The term ‘‘retail rates and charges’’ means rates and charges for the sale of electric energy directly to consumers. 43P.U.H.C.A. of 1935 Sec. 32

(b) FOREIGN RETAIL SALES.—Notwithstanding paragraphs (1) and (2) of subsection (a), retail sales of electric energy produced by a facility located in a foreign country shall not prevent such facility from being an eligible facility, or prevent a person owning or oper- ating, or both owning and operating, such facility from being an exempt wholesale generator if none of the electric energy generated by such facility is sold to consumers in the United States. (c) STATE CONSENT FOR EXISTING RATE-BASED FACILITIES.—If a rate or charge for, or in connection with, the construction of a fa- cility, or for electric energy produced by a facility (other than any portion of a rate or charge which represents recovery of the cost of a wholesale rate or charge) was in effect under the laws of any State as of the date of enactment of this section, in order for the facility to be considered an eligible facility, every State commission having jurisdiction over any such rate or charge must make a spe- cific determination that allowing such facility to be an eligible facil- ity (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law; Provided, That in the case of such a rate or charge which is a rate or charge of an affiliate of a registered holding company: (A) such determination with respect to the facility in ques- tion shall be required from every State commission having jurisdiction over the retail rates and charges of the affiliates of such registered holding company; and (B) the approval of the Commission under this Act shall not be required for the transfer of the facility to an exempt wholesale generator. (d) HYBRIDS.—(1) No exempt wholesale generator may own or operate a portion of any facility if any other portion of the facility is owned or operated by an electric utility company that is an affil- iate or associate company of such exempt wholesale generator. (2) ELIGIBLE FACILITY.—Notwithstanding paragraph (1), an exempt wholesale generator may own or operate a portion of a fa- cility identified in paragraph (1) if such portion has become an eli- gible facility as a result of the operation of subsection (c). (e) EXEMPTION OF EWGS.—An exempt wholesale generator shall not be considered an electric utility company under section 2(a)(3) of this Act and, whether or not a subsidiary company, an affiliate, or an associate company of a holding company, an exempt wholesale generator shall be exempt from all provisions of this Act. (f) OWNERSHIP OF EWGS BY EXEMPT HOLDING COMPANIES.— Notwithstanding any provision of this Act, a holding company that is exempt under section 3 of this Act shall be permitted, without condition or limitation under this Act, to acquire and maintain an interest in the business of one or more exempt wholesale genera- tors. (g) OWNERSHIP OF EWGS BY REGISTERED HOLDING COMPA- NIES.—Notwithstanding any provision of this Act and the Commis- sion’s jurisdiction as provided under subsection (h) of this section, a registered holding company shall be permitted (without the need to apply for, or receive, approval from the Commission, and other- wise without condition under this Act) to acquire and hold the securities, or an interest in the business, of one or more exempt wholesale generators. Sec. 32 P.U.H.C.A. of 1935 44

(h) FINANCING AND OTHER RELATIONSHIPS BETWEEN EWGS AND REGISTERED HOLDING COMPANIES.—The issuance of securities by a registered holding company for purposes of financing the ac- quisition of an exempt wholesale generator, the guarantee of secu- rities of an exempt wholesale generator by a registered holding company, the entering into service, sales or construction contracts, and the creation or maintenance of any other relationship in addi- tion to that described in subsection (g) between an exempt whole- sale generator and a registered holding company, its affiliates and associate companies, shall remain subject to the jurisdiction of the Commission under this Act: Provided, That— (1) section 11 of this Act shall not prohibit the ownership of an interest in the business of one or more exempt wholesale generators by a registered holding company (regardless of where facilities owned or operated by such exempt wholesale generators are located), and such ownership by a registered holding company shall be deemed consistent with the operation of an integrated public utility system; (2) the ownership of an interest in the business of one or more exempt wholesale generators by a registered holding com- pany (regardless of where facilities owned or operated by such exempt wholesale generators are located) shall be considered as reasonably incidental, or economically necessary or appro- priate, to the operations of an integrated public utility system; (3) in determining whether to approve (A) the issue or sale of a security by a registered holding company for purposes of financing the acquisition of an exempt wholesale generator, or (B) the guarantee of a security of an exempt wholesale gener- ator by a registered holding company, the Commission shall not make a finding that such security is not reasonably adapted to the earning power of such company or to the secu- rity structure of such company and other companies in the same holding company system, or that the circumstances are such as to constitute the making of such guarantee an im- proper risk for such company, unless the Commission first finds that the issue or sale of such security, or the making of the guarantee, would have a substantial adverse impact on the financial integrity of the registered holding company system; (4) in determining whether to approve (A) the issue or sale of a security by a registered holding company for purposes other than the acquisition of an exempt wholesale generator, or (B) other transactions by such registered holding company or by its other than with respect to exempt whole- sale generators, the Commission shall not consider the effect of the capitalization or earnings of any subsidiary which is an exempt wholesale generator upon the registered holding com- pany system, unless the approval of the issue or sale or other transaction, together with the effect of such capitalization and earnings, would have a substantial adverse impact on the financial integrity of the registered holding company system; (5) the Commission shall make its decision under para- graph (3) to approve or disapprove the issue or sale of a secu- rity or the guarantee of a security within 120 days of the filing of a declaration concerning such issue, sale or guarantee; and 45P.U.H.C.A. of 1935 Sec. 32

(6) the Commission shall promulgate regulations with re- spect to the actions which would be considered, for purposes of this subsection, to have a substantial adverse impact on the financial integrity of the registered holding company system; such regulations shall ensure that the action has no adverse impact on any utility subsidiary or its customers, or on the ability of State commissions to protect such subsidiary or cus- tomers, and shall take into account the amount and type of capital invested in exempt wholesale generators, the ratio of such capital to the total capital invested in utility operations, the availability of books and records, and the financial and operating experience of the registered holding company and the exempt wholesale generator; the Commission shall promulgate such regulations within 6 months after the enactment of this section; after such 6-month period the Commission shall not approve any actions under paragraph (3), (4) or (5) except in accordance with such issued regulations. (i) APPLICATION OF ACT TO OTHER ELIGIBLE FACILITIES.—In the case of any person engaged directly and exclusively in the busi- ness of owning or operating (or both owning and operating) all or part of one or more eligible facilities, an advisory letter issued by the Commission staff under this Act after the date of enactment of this section, or an order issued by the Commission under this Act after the date of enactment of this section, shall not be required for the purpose, or have the effect, of exempting such person from treatment as an electric utility company under section 2(a)(3) or ex- empting such person from any provision of this Act. (j) OWNERSHIP OF EXEMPT WHOLESALE GENERATORS AND QUALIFYING FACILITIES.—The ownership by a person of one or more exempt wholesale generators shall not result in such person being considered as being primarily engaged in the generation or sale of electric power within the meaning of sections 3(17)(C)(ii) and 3(18)(B)(ii) of the Federal Power Act (16 U.S.C. 796(17)(C)(ii) and 796(18)(B)(ii)). (k) PROTECTION AGAINST ABUSIVE AFFILIATE TRANSACTIONS.— (1) PROHIBITION.—After the date of enactment of this sec- tion, an electric utility company may not enter into a contract to purchase electric energy at wholesale from an exempt whole- sale generator if the exempt wholesale generator is an affiliate or associate company of the electric utility company. (2) STATE AUTHORITY TO EXEMPT FROM PROHIBITION.—Not- withstanding paragraph (1), an electric utility company may enter into a contract to purchase electric energy at wholesale from an exempt wholesale generator that is an affiliate or asso- ciate company of the electric utility company— (A) if every State commission having jurisdiction over the retail rates of such electric utility company makes each of the following specific determinations in advance of the electric utility company entering into such contract: (i) A determination that such commission has suf- ficient regulatory authority, and access to books and records of the electric utility company and any relevant associate, affiliate or subsidiary company to exercise its duties under this subparagraph. Sec. 33 P.U.H.C.A. of 1935 46

(ii) A determination that the transaction— (I) will benefit consumers, (II) does not violate any State law (including where applicable, least cost planning), (III) would not provide the exempt wholesale generator any unfair competitive advantage by virtue of its affiliation or association with the elec- tric utility company, and (IV) is in the public interest; or (B) if such electric utility company is not subject to State commission retail rate regulation and the purchased electric energy: (i) would not be resold to any affiliate or associate company, or (ii) the purchased electric energy would be resold to an affiliate or associate company and every State commission having jurisdiction over the retail rates of such affiliate or associate company makes each of the determinations provided under subparagraph (A), in- cluding the determination concerning a State commis- sion’s duties. (l) RECIPROCAL ARRANGEMENTS PROHIBITED.—Reciprocal arrangements among companies that are not affiliates or associate companies of each other that are entered into in order to avoid the provisions of this section are prohibited. SEC. 33. ø79z–5b¿ TREATMENT OF FOREIGN UTILITIES. (a) EXEMPTIONS FOR FOREIGN UTILITY COMPANIES.— (1) IN GENERAL.—A foreign utility company shall be exempt from all of the provisions of this Act, except as other- wise provided under this section, and shall not, for any pur- pose under this Act, be deemed to be a public utility company under section 2(a)(5), notwithstanding that the foreign utility company may be a subsidiary company, an affiliate, or an asso- ciate company of a holding company or of a public utility com- pany. (2) STATE COMMISSION CERTIFICATION.—Section (a)(1) shall not apply or be effective unless every State commission having jurisdiction over the retail electric or gas rates of a public util- ity company that is an associate company or an affiliate of a company otherwise exempted under section (a)(1) (other than a public utility company that is an associate company or an affiliate of a registered holding company) has certified to the Commission that it has the authority and resources to protect ratepayers subject to its jurisdiction and that it intends to exercise its authority. Such certification, upon the filing of a notice by such State commission, may be revised or withdrawn by the State commission prospectively as to any future acquisi- tion. The requirement of State certification shall be deemed satisfied if the relevant State commission had, prior to the date of enactment of this section, on the basis of prescribed condi- tions of general applicability, determined that ratepayers of a public utility company are adequately insulated from the ef- fects of diversification and the diversification would not impair 47P.U.H.C.A. of 1935 Sec. 33

the ability of the State commission to regulate effectively the operations of such company. (3) DEFINITION.—For purposes of this section, the term ‘‘foreign utility company’’ means any company that— (A) owns or operates facilities that are not located in any State and that are used for the generation, trans- mission, or distribution of electric energy for sale or the distribution at retail of natural or manufactured gas for heat, light, or power, if such company— (i) derives no part of its income, directly or indi- rectly, from the generation, transmission, or distribu- tion of electric energy for sale or the distribution at re- tail of natural or manufactured gas for heat, light, or power, within the United States; and (ii) neither the company nor any of its subsidiary companies is a public utility company operating in the United States; and (B) provides notice to the Commission, in such form as the Commission may prescribe, that such company is a for- eign utility company. (b) OWNERSHIP OF FOREIGN UTILITY COMPANIES BY EXEMPT HOLDING COMPANIES.—Notwithstanding any provision of this Act except as provided under this section, a holding company that is exempt under section 3 of the Act shall be permitted without condi- tion or limitation under the Act to acquire and maintain an inter- est in the business of one or more foreign utility companies. (c) REGISTERED HOLDING COMPANIES.— (1) OWNERSHIP OF FOREIGN UTILITY COMPANIES BY REG- ISTERED HOLDING COMPANIES.—Notwithstanding any provision of this Act except as otherwise provided under this section, a registered holding company shall be permitted as of the date of enactment of this section (without the need to apply for, or receive approval from the Commission) to acquire and hold the securities or an interest in the business, of one or more foreign utility companies. The Commission shall promulgate rules or regulations regarding registered holding companies’ acquisition of interests in foreign utility companies which shall provide for the protection of the customers of a public utility company which is an associate company of a foreign utility company and the maintenance of the financial integrity of the registered holding company system. (2) ISSUANCE OF SECURITIES.—The issuance of securities by a registered holding company for purposes of financing the ac- quisition of a foreign utility company, the guarantee of securi- ties of a foreign utility company by a registered holding com- pany, the entering into service, sales, or construction contracts, and the creation or maintenance of any other relationship be- tween a foreign utility company and a registered holding com- pany, its affiliates and associate companies, shall remain sub- ject to the jurisdiction of the Commission under this Act (un- less otherwise exempted under this Act, in the case of a trans- action with an affiliate or associate company located outside of the United States). Any State commission with jurisdiction over the retail rates of a public utility company which is part Sec. 33 P.U.H.C.A. of 1935 48

of a registered holding company system may make such rec- ommendations to the Commission regarding the registered holding company’s relationship to a foreign utility company, and the Commission shall reasonably and fully consider such State recommendation. (3) CONSTRUCTION.—Any interest in the business of 1 or more foreign utility companies, or 1 or more companies orga- nized exclusively to own, directly or indirectly, the securities or other interest in a foreign utility company, shall for all pur- poses of this Act, be considered to be— (A) consistent with the operation of a single integrated public utility system, within the meaning of section 11; and (B) reasonably incidental, or economically necessary or appropriate, to the operations of an integrated public util- ity system, within the meaning of section 11. (d) EFFECT ON EXISTING LAW; NO STATE PREEMPTION.—Noth- ing in this section shall— (1) preclude any person from qualifying for or maintaining any exemption otherwise provided for under this Act or the rules, regulations, or orders promulgated or issued under this Act; or (2) be deemed or construed to limit the authority of any State (including any State regulatory authority) with respect to— (A) any public utility company or holding company subject to such State’s jurisdiction; or (B) any transaction between any foreign utility com- pany (or any affiliate or associate company thereof) and any public utility company or holding company subject to such State’s jurisdiction. (e) REPORTING REQUIREMENTS.— (1) FILING OF REPORTS.—A public utility company that is an associate company of a foreign utility company shall file with the Commission such reports (with respect to such foreign utility company) as the Commission may by rules, regulations, or order prescribe as necessary or appropriate in the public in- terest or for the protection of investors or consumers. (2) NOTICE OF ACQUISITIONS.—Not later than 30 days after the consummation of the acquisition of an interest in a foreign utility company by an associate company of a public utility company that is subject to the jurisdiction of a State commis- sion with respect to its retail electric or gas rates or by such public utility company, such associate company or such public utility company, shall provide notice of such acquisition to every State commission having jurisdiction over the retail elec- tric or gas rates of such public utility company, in such form as may be prescribed by the State commission. (f) PROHIBITION ON ASSUMPTION OF LIABILITIES.— (1) IN GENERAL.—No public utility company that is subject to the jurisdiction of a State commission with respect to its re- tail electric or gas rates shall issue any security for the pur- pose of financing the acquisition, or for the purposes of financ- ing the ownership or operation, of a foreign utility company, 49P.U.H.C.A. of 1935 Sec. 34

nor shall any such public utility company assume any obliga- tion or liability as guarantor, endorser, surety, or otherwise in respect of any security of a foreign utility company. (2) EXCEPTION FOR HOLDING COMPANIES WHICH ARE PRE- DOMINANTLY PUBLIC UTILITY COMPANIES.—Subsection (f)(1) shall not apply if: (A) the public utility company that is subject to the jurisdiction of a State commission with respect to its retail electric or gas rates is a holding company and is not an affiliate under section 2(a)(11)(B) of another holding com- pany or is not subject to regulation as a holding company and has no affiliate as defined in section 2(a)(11)(A) that is a public utility company subject to the jurisdiction of a State commission with respect to its retail electric or gas rates; and (B) each State commission having jurisdiction with re- spect to the retail electric and gas rates of such public util- ity company expressly permits such public utility to en- gage in a transaction otherwise prohibited under section (f)(1); and (C) the transaction (aggregated with all other then- outstanding transactions exempted under this subsection) does not exceed 5 per centum of the then-outstanding total capitalization of the public utility. (g) PROHIBITION ON PLEDGING OR ENCUMBERING UTILITY AS- SETS.—No public utility company that is subject to the jurisdiction of a State commission with respect to its retail electric or gas rates shall pledge or encumber any utility assets or utility assets of any subsidiary thereof for the benefit of an associate foreign utility company. SEC. 34. ø79z–5c¿ EXEMPT COMPANIES. (a) DEFINITIONS.—For purposes of this section— (1) EXEMPT TELECOMMUNICATIONS COMPANY.—The term ‘‘exempt telecommunications company’’ means any person determined by the Federal Communications Commission to be engaged directly or indirectly, wherever located, through one or more affiliates (as defined in section 2(a)(11)(B)), and exclu- sively in the business of providing—– (A) telecommunications services; (B) information services; (C) other services or products subject to the jurisdic- tion of the Federal Communications Commission; or (D) products or services that are related or incidental to the provision of a product or service described in sub- paragraph (A), (B), or (C). No person shall be deemed to be an exempt telecommuni- cations company under this section unless such person has ap- plied to the Federal Communications Commission for a deter- mination under this paragraph. A person applying in good faith for such a determination shall be deemed an exempt tele- communications company under this section, with all of the exemptions provided by this section, until the Federal Commu- nications Commission makes such determination. The Federal Sec. 34 P.U.H.C.A. of 1935 50

Communications Commission shall make such determination within 60 days of its receipt of any such application filed after the enactment of this section and shall notify the Commission whenever a determination is made under this paragraph that any person is an exempt telecommunications company. Not later than 12 months after the date of enactment of this sec- tion, the Federal Communications Commission shall promul- gate rules implementing the provisions of this paragraph which shall be applicable to applications filed under this para- graph after the effective date of such rules. (2) OTHER TERMS.—For purposes of this section, the terms ‘‘telecommunications services’’ and ‘‘information services’’ shall have the same meanings as provided in the Communications Act of 1934. (b) STATE CONSENT FOR SALE OF EXISTING RATE-BASED FACILI- TIES.—If a rate or charge for the sale of electric energy or natural gas (other than any portion of a rate or charge which represents recovery of the cost of a wholesale rate or charge) for, or in connec- tion with, assets of a public utility company that is an associate company or affiliate of a registered holding company was in effect under the laws of any State as of December 19, 1995, the public utility company owning such assets may not sell such assets to an exempt telecommunications company that is an associate company or affiliate unless State commissions having jurisdiction over such public utility company approve such sale. Nothing in this sub- section shall preempt the otherwise applicable authority of any State to approve or disapprove the sale of such assets. The ap- proval of the Commission under this Act shall not be required for the sale of assets as provided in this subsection. (c) OWNERSHIP OF ETCS BY EXEMPT HOLDING COMPANIES.— Notwithstanding any provision of this Act, a holding company that is exempt under section 3 of this Act shall be permitted, without condition or limitation under this Act, to acquire and maintain an interest in the business of one or more exempt telecommunications companies. (d) OWNERSHIP OF ETCS BY REGISTERED HOLDING COMPA- NIES.—Notwithstanding any provision of this Act, a registered hold- ing company shall be permitted (without the need to apply for, or receive, approval from the Commission, and otherwise without con- dition under this Act) to acquire and hold the securities, or an in- terest in the business, of one or more exempt telecommunications companies. (e) FINANCING AND OTHER RELATIONSHIPS BETWEEN ETCS AND REGISTERED HOLDING COMPANIES.—The relationship between an exempt telecommunications company and a registered holding com- pany, its affiliates and associate companies, shall remain subject to the jurisdiction of the Commission under this Act: Provided, That— (1) section 11 of this Act shall not prohibit the ownership of an interest in the business of one or more exempt tele- communications companies by a registered holding company (regardless of activities engaged in or where facilities owned or operated by such exempt telecommunications companies are lo- cated), and such ownership by a registered holding company 51P.U.H.C.A. of 1935 Sec. 34

shall be deemed consistent with the operation of an integrated public utility system; (2) the ownership of an interest in the business of one or more exempt telecommunications companies by a registered holding company (regardless of activities engaged in or where facilities owned or operated by such exempt telecommuni- cations companies are located) shall be considered as reason- ably incidental, or economically necessary or appropriate, to the operations of an integrated public utility system; (3) the Commission shall have no jurisdiction under this Act over, and there shall be no restriction or approval required under this Act with respect to (A) the issue or sale of a security by a registered holding company for purposes of financing the acquisition of an exempt telecommunications company, or (B) the guarantee of a security of an exempt telecommunications company by a registered holding company; and (4) except for costs that should be fairly and equitably allo- cated among companies that are associate companies of a reg- istered holding company, the Commission shall have no juris- diction under this Act over the sales, service, and construction contracts between an exempt telecommunications company and a registered holding company, its affiliates and associate com- panies. (f) REPORTING OBLIGATIONS CONCERNING AND ACTIVITIES OF REGISTERED PUBLIC-UTILITY HOLDING COMPANY SYS- TEMS.— (1) OBLIGATIONS TO REPORT INFORMATION.—Any registered holding company or subsidiary thereof that acquires or holds the securities, or an interest in the business, of an exempt tele- communications company shall file with the Commission such information as the Commission, by rule, may prescribe concerning— (A) investments and activities by the registered hold- ing company, or any subsidiary thereof, with respect to exempt telecommunications companies, and (B) any activities of an exempt telecommunications company within the holding company system, that are reasonably likely to have a material impact on the financial or operational condition of the holding company sys- tem. (2) AUTHORITY TO REQUIRE ADDITIONAL INFORMATION.—If, based on reports provided to the Commission pursuant to para- graph (1) of this subsection or other available information, the Commission reasonably concludes that it has concerns regard- ing the financial or operational condition of any registered holding company or any subsidiary thereof (including an exempt telecommunications company), the Commission may re- quire such registered holding company to make additional re- ports and provide additional information. (3) AUTHORITY TO LIMIT DISCLOSURE OF INFORMATION.— Notwithstanding any other provision of law, the Commission shall not be compelled to disclose any information required to be reported under this subsection. Nothing in this subsection shall authorize the Commission to withhold the information Sec. 34 P.U.H.C.A. of 1935 52

from Congress, or prevent the Commission from complying with a request for information from any other Federal or State department or agency requesting the information for purposes within the scope of its jurisdiction. For purposes of section 552 of title 5, United States Code, this subsection shall be consid- ered a statute described in subsection (b)(3)(B) of such section 552. (g) ASSUMPTION OF LIABILITIES.—Any public utility company that is an associate company, or an affiliate, of a registered holding company and that is subject to the jurisdiction of a State commis- sion with respect to its retail electric or gas rates shall not issue any security for the purpose of financing the acquisition, owner- ship, or operation of an exempt telecommunications company. Any public utility company that is an associate company, or an affiliate, of a registered holding company and that is subject to the jurisdic- tion of a State commission with respect to its retail electric or gas rates shall not assume any obligation or liability as guarantor, en- dorser, surety, or otherwise by the public utility company in respect of any security of an exempt telecommunications company. (h) PLEDGING OR MORTGAGING OF ASSETS.—Any public utility company that is an associate company, or affiliate, of a registered holding company and that is subject to the jurisdiction of a State commission with respect to its retail electric or gas rates shall not pledge, mortgage, or otherwise use as collateral any assets of the public utility company or assets of any subsidiary company thereof for the benefit of an exempt telecommunications company. (i) PROTECTION AGAINST ABUSIVE AFFILIATE TRANSACTIONS.—A public utility company may enter into a contract to purchase serv- ices or products described in subsection (a)(1) from an exempt tele- communications company that is an affiliate or associate company of the public utility company only if— (1) every State commission having jurisdiction over the re- tail rates of such public utility company approves such con- tract; or (2) such public utility company is not subject to State com- mission retail rate regulation and the purchased services or products— (A) would not be resold to any affiliate or associate company; or (B) would be resold to an affiliate or associate com- pany and every State commission having jurisdiction over the retail rates of such affiliate or associate company makes the determination required by subparagraph (A). The requirements of this subsection shall not apply in any case in which the State or the State commission concerned publishes a no- tice that the State or State commission waives its authority under this subsection. (j) NONPREEMPTION OF RATE AUTHORITY.—Nothing in this Act shall preclude the Federal Energy Regulatory Commission or a State commission from exercising its jurisdiction under otherwise applicable law to determine whether a public utility company may recover in rates the costs of products or services purchased from or sold to an associate company or affiliate that is an exempt tele- communications company, regardless of whether such costs are in- 53P.U.H.C.A. of 1935 Sec. 34 curred through the direct or indirect purchase or sale of products or services from such associate company or affiliate. (k) RECIPROCAL ARRANGEMENTS PROHIBITED.—Reciprocal arrangements among companies that are not affiliates or associate companies of each other that are entered into in order to avoid the provisions of this section are prohibited. (l) BOOKS AND RECORDS.—(1) Upon written order of a State commission, a State commission may examine the books, accounts, memoranda, contracts, and records of— (A) a public utility company subject to its regulatory au- thority under State law; (B) any exempt telecommunications company selling prod- ucts or services to such public utility company or to an asso- ciate company of such public utility company; and (C) any associate company or affiliate of an exempt tele- communications company which sells products or services to a public utility company referred to in subparagraph (A), wherever located, if such examination is required for the effective discharge of the State commission’s regulatory responsibilities af- fecting the provision of electric or gas service in connection with the activities of such exempt telecommunications company. (2) Where a State commission issues an order pursuant to paragraph (1), the State commission shall not publicly disclose trade secrets or sensitive commercial information. (3) Any United States district court located in the State in which the State commission referred to in paragraph (1) is located shall have jurisdiction to enforce compliance with this subsection. (4) Nothing in this section shall— (A) preempt applicable State law concerning the provision of records and other information; or (B) in any way limit rights to obtain records and other information under Federal law, contracts, or otherwise. (m) INDEPENDENT AUTHORITY FOR STATE COMMIS- SIONS.— (1) STATE MAY ORDER AUDIT.—Any State commission with jurisdiction over a public utility company that— (A) is an associate company of a registered holding company; and (B) transacts business, directly or indirectly, with a subsidiary company, an affiliate or an associate company that is an exempt telecommunications company, may order an independent audit to be performed, no more fre- quently than on an annual basis, of all matters deemed rel- evant by the selected auditor that reasonably relate to retail rates: Provided, That such matters relate, directly or indi- rectly, to transactions or transfers between the public utility company subject to its jurisdiction and such exempt tele- communications company. (2) SELECTION OF FIRM TO CONDUCT AUDIT.—(A) If a State commission orders an audit in accordance with paragraph (1), the public utility company and the State commission shall jointly select, within 60 days, a firm to perform the audit. The firm selected to perform the audit shall possess demonstrated qualifications relating to— Sec. 35 P.U.H.C.A. of 1935 54

(i) competency, including adequate technical training and professional proficiency in each discipline necessary to carry out the audit; and (ii) independence and objectivity, including that the firm be free from personal or external impairments to independence, and should assume an independent position with the State commission and auditee, making certain that the audit is based upon an impartial consideration of all pertinent facts and responsible opinions. (B) The public utility company and the exempt tele- communications company shall cooperate fully with all reason- able requests necessary to perform the audit and the public utility company shall bear all costs of having the audit per- formed. (3) AVAILABILITY OF AUDITOR’S REPORT.—The auditor’s re- port shall be provided to the State commission not later than 6 months after the selection of the auditor, and provided to the public utility company not later than 60 days thereafter. (n) APPLICABILITY OF TELECOMMUNICATIONS REGULATION.— Nothing in this section shall affect the authority of the Federal Communications Commission under the Communications Act of 1934, or the authority of State commissions under State laws con- cerning the provision of telecommunications services, to regulate the activities of an exempt telecommunications company.

SEPARABILITY OF PROVISIONS

SEC. 35. ø79z–6¿ If any provision of this title or the application of such provision to any person or circumstances shall be held in- valid, the remainder of the title and the application of such provi- sion to persons or circumstances other than those as to which it is held invalid shall not be affected thereby.

SHORT TITLE

SEC. 36. ø79¿ This title may be cited as the ‘‘Public Utility Holding Company Act of 1935’’. TITLE II—AMENDMENTS TO FEDERAL POWER ACT øTitle II of the Public Utility Act of 1935 amended the Federal Water Power Act, and added a new Part II to that Act regulating electric utility companies engaged in the interstate transmission of electric energy. Section 318 of that Act, relating to the applicability of that Act and the Public Utility Holding Company Act of 1935 to the same person, is set forth below.¿ SEC. 318. If, with respect to the issue, sale, or guaranty of a security, or assumption of obligation or liability in respect of a security, the method of keeping accounts, the filing of reports, or the acquisition or disposition of any security, capital assets, facili- ties, or any other subject matter, any person is subject both to a requirement of the Public Utility Holding Company Act of 1935 or of a rule, regulation, or order thereunder and to a requirement of this Act or of a rule, regulation, or order thereunder, the require- ment of the Public Utility Holding Company Act of 1935 shall apply to such person, and such person shall not be subject to the 55P.U.H.C.A. of 1935 Sec. 36 requirement of this Act, or of any rule, regulation, or order there- under, with respect to the same subject matter, unless the Securi- ties and Exchange Commission has exempted such person from such requirement of the Public Utility Holding Company Act of 1935, in which case the requirements of this Act shall apply to such person.